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Well, I’ve done a lot of these and this is my favored package:
I have had lineups each time I put a Lease Option to the public.
There needs to be two agreements, an Option Agreement and a Lease Agreement. For simplicity they both need to start the same day and end the same day.
Each adult needs to be a signatory to the Agreements. The contracts and how they are written is extremely important. When I’ve been sued, I’ve won. It needs to be handled and documented in Escrow with Title and include appropriate Disclosures.
I couldn’t care less about their credit.
Since they don’t have to qualify using a bank, there is added value to them on the transaction.
I sell for 10% above market value. No step up in following years. They pay 10% as a Non Refundable Option Fee. The money is not escrowed, no need to, it’s non refundable.
Option fee gets applied to the option amount when they exercise the option.
I offer a two year lease option. 3 years is too long in my opinion but if you are simply looking for cash flow, 3 years is fine.
Since they are providing 10% down, I don’t have them put down a security deposit. The non refundable option fee is plenty.
Their monthly payment is 10% above what the place would rent for as a LTR. Since they don’t have to qualify using normal criteria, there is added value to them on the monthly so there is an up charge.
Taxes and insurance costs are “covered” in the rent. (People don’t pay taxes and homeowners Insurance on properties they don’t own.)
They can “refinance” anytime they can qualify for outside financing.
The option fee counts as a down payment when talking to future lenders.
Monthly rent has NO credit going toward the purchase price/down payment. Rent credit is not used. If you choose to allow this, make sure you keep accurate records and don’t commingle funds.