The writers of these options can easily take advantage of tenants by making the exercise of such options nearly impossible such as in Melissa's story. (2) The pricing of lease options is too sophisticated for most people as stochastic partial differential equations are involved.

Once the option is either exercised or has expired, the tax is then due.

Do you want to exercise this right or waive it?

If it is a pretty house in a really good area, go for it.Separate market rent and add a monthly option payment for the difference.Move in option payment, plus 1st and last, plus monthly option payment.I like tying the exercise price to a new appraisal, as the buyer deserves not to get gouged by paying above retail.Ex) Exercise price = new appraisalMarket rent = 2200Mortgage PITI = 2400 Seller wants 2900Rent + option per month = $2200 + 700 option per monthAssignment fee = 3% or say .03 x 284K = 8520.You could have a formula for exercise price as new appraisal + $8520 so the seller nets more money.

Make 4k at move in and make $200 moving forward until they exercise their option to purchase.

I guess part of my point in this exercise is to show the work involved in just the book keeping aspects of all of this.

The exercise is probably not a good one because it fails to take a few things in consideration.

The bank holding the mortgage exercised its rights to the rents, and all of the tenants have been paying the rent to the bank.A tax lien certificate was sold on the property a few months ago as well.The issue is, no one is maintaining the property, and there is no accountability.

It's a discounting cash flow exercise.

Perhaps, its only an exercise for an accounting nerd such as myself.Do investors really consider the amount of time they're investing?