$1,650 rent with $300 credited. Is that credit real money or am I just paying above market for it?

You're not missing much, that arithmetic is the arithmetic. I'd add that a forced savings plan you can't raid is worth something to people who otherwise wouldn't save, even at a bad rate. Whether that's you is a separate question.

The comparison you ran is the right one and the numbers hold up. $250 a month above market over 36 months is $9,000 of cost, and calling $10,800 of it a credit doesn't create value on its own. Where the value in a lease option actually lives is the option itself: you've locked $240,000 for three years, and if the house is worth $265,000 when you exercise, that spread is yours. If it's worth $228,000, you walk away and you've spent the $7,000 fee plus the rent premium for the right to see how it turned out.

The part that surprises people at the end is that the credit and the down payment are not the same thing to a lender. Loan programs generally recognize rent credit only to the extent your rent exceeded market rent, verified by an appraiser and by proof you actually paid the full amount each month. So your $250 differential may count for something toward down payment and the other $50 a month likely functions as a price reduction instead. Rules differ by loan program and lender, so anyone planning to finance the exercise should get the treatment in writing from a lender early rather than at month 34.

Before you compare anything else, read the forfeiture language. Most of these agreements void the month's credit if rent arrives late, sometimes with no grace period at all, and a few void the entire accumulated credit after a set number of late payments. A deal where $10,800 can become $9,000 because of two bad Februaries is a different deal from the one in the ad.

$1,650 against $1,400 comps is a 18 percent premium, which is on the high side of what I see advertised. Also check whether that $1,650 includes anything. Some of these shift lawn care, HVAC service and minor repairs to the tenant, and if you're covering $150 a month of maintenance the real premium is closer to $400.

Whoever wrote the ad picked $240,000 for a reason. What did the last three sales on that street close at?

@solder that's the whole ballgame. I've seen rent-to-own listings priced 8 to 12 percent above what a cash buyer would pay, on the theory that the tenant-buyer isn't shopping the price, they're shopping the monthly. If $240,000 is already $215,000 of house, the locked price is worth negative money and the credit is decoration.

Also who's paying for the roof over the next three years. On a house that age a full tear-off is $14,000 to $22,000 in my area, and if the lease says tenant handles the exterior you've just agreed to something bigger than the entire credit.

If verity walks away at month 36, the seller keeps $7,000 plus 36 months of above-market rent and still owns the house. Why would any seller ever prefer the sale?

@vellum a lot of them don't, and that's the thing to watch for. A seller whose real plan is churning option fees will price the strike high enough that nobody exercises. That's why harrow's question about comps matters more than the credit math.

Ask now what your credit score and income would need to look like in 36 months, and whether it's plausible. The credit is worthless if you can't qualify at exercise, and then you've paid $16,000 for a rental. Get a loan officer to tell you what's missing today.

Three years is short for appreciation to do the work you'd need here. I'd want a longer window or a lower strike, and sellers rarely give both.

What happens if the seller stops paying their own mortgage during your three years? That's the version of this that worries me and the ads never mention it.

@marlow that's what a recorded memorandum of option is partly for, though it doesn't stop a foreclosure and recording rules vary by state. I'd also ask for proof the taxes are current, and I'd want the right to check the loan status once a year written into the option.

One line I'd try in negotiation: keep the rent at $1,450 with no credit at all and drop the strike to $228,000. Same economics for the seller if they're honest about it, and it tells you fast whether they care about the sale or the monthly premium.

@bramble I like that test. Though on the ones I've talked to, the moment you restructure so their monthly income drops they lose interest, which tells you what the deal was actually for.