Lease Options

Comments(3)

• 
  edmeyer4th June, 2005

  Todd,
  When you ask how they work, what do you mean? The short answer is that they are essentially two contracts. Sometimes they are combined. There is a lease which hopefully you understand and an option. The option is an irrevocable right given by a seller to a potential buyer to purchase the property . The potential buyer puts up consideration for the granting of this right. The consideration can be money, but does not have to be. There is a period for the option to be exercised. The potential buyer does not necessarily need to exercise the option, but if he/she does, the sale must take place.
  
  Regards,
  Ed

• 
  edmeyer5th June, 2005

  Usually the option agreement is written so that the option can be exercised at any point in time during the option period-- not just at the end.
  
  The option consideration does not necessarily apply to either the down payment or to the purchase price. This depends completely upon what is agreed to by the parties. In fact, the option consideration does not even have to be money. It could be labor. For example, you buy a property that needs repair. You can accept fix-up as option consideration. This should be closely monitored with appropriate wording in your agreement. The advantage is that your property is worth more in the event that the option is not exercised.

• 
  vikingchild5th June, 2005

  edmeyer and wannabe21
  
  I appreciate you being so accurate in explaining a lease-option. Sometimes it seems too wordy for someone who is just being introduced to real estate investing and may not understand all the terms you are using. I was trying to explain a lease option in as simple of terms as possible. Once Todd gets the idea down then he can learn all the details involved in a lease-option. But I definately will not use the term "down payment" when I mean "option consideration". Thanks for clarifying that.