Lease Option – Real Estate Investing Using Lease Options – Lease Options Are a Great Way to Invest in Real Estate. Watch This Video to Learn What a Lease Option Is and When It Makes Sense to Lease Properties With an Option to Buy.

To Learn More About Lease Options:

1. What is a Lease Option:

* A “lease option” is really two separate but related agreements: a “lease agreement” and an “option agreement”.
* Lease Agreement – standard agreement to rent a home, sets terms of lease
* Option Agreement – the right to purchase the home within a specified period of time for a fixed purchase price
* Unilateral agreement – Seller is obligated to sell, buyer not obligated to buy

2. Terms:

* rent credits (?) – portion of each month’s rent is credited towards the sales price, small percentage of monthly rent
* option consideration – upfront fee paid by tenant buyer to the seller that gives the tenant buyer the option to buy at a fixed priced during a certain period of time
* sandwich lease –
* assignment – “assign” the option over to another investor for a fee, they resume payments and ownership of the contract and property at time of closing/ending of option period.
* sublease – you are the primary on the contract to purchase, but lease the property to a different tenant, responsibility is still yours.

3. Why lease options?


* Move property faster – buyers market = competition
* Good way to sell when market is down
* Pass small repairs onto buyer
* Tenant Buyer – better maintenance of home, intention to buy


* Appreciation – fixed price
* Repair Credit

* Little cash upfront vs. Buying upfront

* Not Obligated to buy when market changes
* Hard time qualifying for loans
* No taxes, less liability: Don’t own the home (yet), don’t have to pay property taxes and your liability is reduced.


* 12 months with the right to renew annually 3-5 years
* Not locked in – reduce risk
* Multiple ways to profit – upfront fee, monthly rent (sublease), sale, assignment
o What you charge vs. what you pay
o Assignments – legal advice – more risk
* Participate in market appreciation

Lease options are a great real estate investing strategy for sellers, buyers, and investors. Including this strategy in your arsenal of real estate tactics will make you a stronger more educated investor. Most importantly, what can make or break a good lease option is the agreement, so my advice to you is to be certain that you fully understand the terms of the lease option agreement before signing any agreement.

Again, this is Frank Chen with Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.

15 thoughts on “Lease Option – Real Estate Investing Using Lease Options

  1. Yes, if you bought the property in cash then their is equity in the property to where you can pull it out during a refinance. Thanks for your question.

  2. Say I bought a property for cash, I do a lease option on the property. Can I refinance the property in 6 months even if I have a tenent/buyer in the property?

  3. typically doesn't a buyers monthly payments reduce the balance as long as before the terms expire the buyer exercises the option and buys on a lease purchase

  4. Working as an investor. What if any would you recommend. And if I was on the other side of the fence looking to do a lease option with a person that already owns the property. Which contract would you use?

  5. @GreatRealEstateAdvce Thanks for your question. As the homeowner, when you have a tenant buyer in your home, you usually work it out to where any major repairs needed for the home, the roof, hot water heater, etc… will be at the expense of the tenant buyer, and will be later credited back to them at closing. It's important to save documentation of this, as well as make note of this in the lease option to purchase agreements.

  6. I stumbled on your video but I have a question…you mentioned lease option is great for buyer and seller. Correct me if Im wrong but I can't see how lease option will benefit a home owner. a) During a lease period, an owner is still responsible for mainting the home ie. roof needs to be replace etc. for potential buyer whos leasing it..why would he lease a property and he had to shoulder the cost of maintaining it? I think lease option is great if you owned a property that is fully paid off.

  7. Good info. One of the benefits of buying with lease option that you mentioned: Not having to qualify for a mortgage…but don't you have to qualify for a mortgage anyway when it is time to buy the property?

  8. I like your videos so far but what do you suggest for the seller's end do you have other videos? I am in process of my 1st owner finance and am looking for advice.
    Any suggestions would be appreciated. Thanks

  9. I always wondered how and find real estate investors for your deals. I am not talking about hard money banks but true real estate investors

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