Things I Don't Understand About Lease Options...

[Jeff G.]

So, all of a sudden I'm hearing a lot about Lease Options again. I thought these things were basically eliminated as a viable investment strategy when Dodd-Frank was enacted. 

Apparently I was wrong, so naturally I have some questions:

1. I thought Dodd-Frank (or possibly the Safe Act) handicapped Lease Options severely by setting the yearly maximum to some low figure like 3 per year. I'm hearing you can legally get around this limitation by doing no more than 3 Lease Options inside a single entity such as an LLC and then spawning a new one to hold your next three deals, etc. Is that accurate?

2. It's my understanding that, historically, Lease Options had a high failure rate. That is, the tenant-buyer would often not have good enough credit to buy the house at the end of the lease or the buyer falls on hard times and leaves/is evicted. 

I love making a buck the same as anyone else. However, I am not going to set a tenant buyer up to fail in the process. Is that perception accurate? If so, how do you mitigate these things in a way that is fair to you (profit is made) and gives the buyer has a high (lets say, >80%) of success all things being equal?

3. What are the actual down sides of doing lease options? What can go sideways that tend not to get addressed?

Of course, before doing anything unfamiliar in real estate I'll talk to a good Real Estate lawyer and cover my backside. I just want to get a sense of what BP has to say on the subject.

Oh, and what is the difference between a Lease Option and a Sandwich Lease Option?

[Christine Kankowski]

I sold my personal house this way.  Buyers didn't have access to cash for about a year but knew they wanted it.  They have a big non-refundable deposit, paid rent, and handled repairs for the year.

We agreed on a price up front which ended up being good for them, since the market really spiked that hear in san diego, but we were happy that the deal was done.  If they had backed out we had the non-refundable deposit and would have gotten a higher price, but we were happy with the deal .  It worked for all parties.   Buyers Agent did not get paid until purchase was complete. ( I was the agent on my side)