Strategy Lease Options - REISkills.com

Master the Game: Using Lease Options to Build Wealth (No Banks Needed!)

Brought to you by Brian Gibbons | www.REISkills.com

Training Module: The Investor’s Guide to Lease Options

Introduction: The Power of Creative Financing

What if you could control property, generate cash flow, and secure a future sale without dealing with bank qualifying, down payments, or hefty mortgages? Welcome to the world of Lease Options—one of the most powerful creative financing strategies available.

Chapter 1: What is a Lease Option? The Two Sides of the Coin

A Lease Option is a two-part contract:

A Lease Agreement: The tenant pays rent to live in the property.
An Option Agreement: The tenant earns the right, but not the obligation, to purchase the property at a predetermined price before a future date.

Let’s break it down from both perspectives.

Chapter 2: When You Are The OWNER (The “Optionor”)

You are the property owner. You lease the property to a tenant and give them an option to buy it from you later.

Benefit: You Get a “Tenant-Buyer”
They treat the property like their own. They are highly motivated to maintain it because they plan to own it.
Benefit: Cash Flow NOW
You collect monthly rent, often at or above market rate.
Benefit: A Non-Refundable Option Fee
You get an upfront payment (e.g., $3,000-$5,000) for granting the option. This is your money to keep, even if they never buy.
Benefit: You Lock In a Sale Price Today
If the market goes up, you still sell at the agreed-upon price. If the market goes down, your tenant-buyer likely won’t exercise their option, and you keep the option fee and all the rent.
Risk: You Are Tied to One Buyer
You can’t sell the property to anyone else during the option period. You must be ready to sell if they exercise their option.
Risk: Maintenance is (Usually) Still Your Responsibility
Unless the contract states otherwise, as the legal owner, you are typically responsible for major repairs.

The Owner’s Goal: Generate strong cash flow, secure a potential future sale, and get a large upfront fee—all while your tenant-buyer pays down your mortgage.

Chapter 3: When You Are The TENANT-BUYER (The “Optionee”)

You are the tenant. You lease the property and secure the future right to buy it.

Benefit: You Control a Property with Little Money Down
You get into a house you love without a massive down payment or perfect credit. You control the property and its future appreciation for just a small option fee.
Benefit: Lock In a Purchase Price
If home prices skyrocket, you win. You get to buy at the lower, pre-agreed price.
Benefit: Rent Credits (This is the Secret Sauce!)
A rent credit is a seller concession where a portion of your monthly rent is applied toward your future down payment.
- *Example: Your rent is $2,000/month. Your contract states a $500/month rent credit. After 24 months, you have built up a $12,000 credit to use at closing!*
Risk: You Could Lose Your Option Money
If you decide not to buy or can’t get financing, you walk away. The option fee and all rent credits are typically lost. This is the cost of “renting” the option.
Risk: The Owner Could Default
If the owner stops paying their mortgage, the bank could foreclose, and you could lose the property and your investment.

The Tenant-Buyer’s Goal: Get into a home now, lock in a price, and build a down payment through rent credits while you improve your credit to qualify for a mortgage.

Chapter 4: Are Lease Options Legal?

Yes, Lease Options are perfectly legal in all 50 states. However, they are highly regulated to protect consumers from predatory practices. The key is to:

Use a Attorney-Reviewed Contract: Never use a generic form from the internet. State laws vary significantly.
Be Transparent: All terms must be clearly disclosed to all parties.
Follow Local Laws: Some states have specific rules regarding option periods, fees, and disclosures.

This is not a “handshake deal.” It is a formal, binding contract that must be done correctly.

Chapter 5: The FHA Loophole: From Renter to Owner

This is a massive benefit for tenant-buyers!

Yes, it can be significantly easier to qualify for an FHA mortgage after a lease option.

FHA Guidelines allow a portion of your rent history to be used as proof of creditworthiness for that specific property. If you have made your lease option payments on time for 12 months or more, your lender can use that payment history in lieu of a traditional credit history for that home.

This is a game-changer for those with thin credit files or past issues who are now rebuilding. You’re not just renting; you’re building a documented payment trail that leads directly to mortgage approval.

Key Takeaways & Your Next Step

	The Owner (Seller)	The Tenant-Buyer)
BENEFITS	✅ Upfront Option Fee ✅ Above-Market Rent ✅ Potential Sale ✅ Motivated Tenant	✅ Control with Little Down ✅ Price Lock ✅ Rent Credits ✅ Path to Mortgage
RISKS	❌ Tied to One Buyer ❌ Responsible for Repairs	❌ Lose Investment if Walk Away ❌ Seller Could Default

The Bottom Line: Lease Options are a powerful, flexible tool for both sides of a real estate transaction. For investors, it’s a way to generate premium returns on properties. For aspiring homeowners, it’s a viable path to ownership that bypasses traditional roadblocks.

Warning: Don’t Go It Alone.

The biggest risk in a lease option is a poorly written contract. The terms of the option, the rent credits, the maintenance responsibilities, and the exit strategies must be crystal clear to protect everyone involved.

Ready to Implement a Lease Option Strategy?

Visit www.REISkills.com right now to access our resource library, including:

State-Specific Lease Option Agreement Templates
Comprehensive Calculators for Setting Rent Credits & Option Fees
In-Depth Training Courses on how to structure win-win deals.

Don’t guess with your financial future. Learn the right way from the start.

www.REISkills.com