My tenant-buyer exercised and cleared $41,000 in equity after 26 months and I want to talk about what I got right by accident
Spokane, 3-bed 1.5-bath, listed at $279,000 in late 2022. Seller had tried twice to close a traditional sale and both buyers fell through on financing. I came in with a 24-month option at $285,000, $7,500 option fee, $200/month rent credit. The tenant-buyer was a nurse, solid income, two collection accounts she said she could clean up. I believed her because I wanted to.
What I got right, mostly by not knowing enough to overcomplicate it: I set the strike price at $285,000 when comps were already nudging $290,000. I thought I was being fair. Turned out I had just given her a soft cushion going in, which meant when she walked into a lender at month 20 and comps had moved to $308,000, she had real equity to work with. The lender counted $4,800 of the rent credit, not all of it, but enough. She closed at month 26.
My spread after the option fee and my costs was $14,200. That is not a home run. But I had zero vacancy risk, the property was maintained better than anything I would have managed remotely, and I was not the one calling a plumber at 11pm.
The thing I would have done differently is document the rent credit agreement in a way the lender could actually use from day one. I had to scramble to produce a clean payment history at month 20 because I had been keeping it in a spreadsheet nobody else could read. The lender wanted a formal ledger and it took me four days to produce something that looked institutional enough. Almost killed the deal on the buyer's end, which would have killed mine.
If you are setting up your first one and you think the rent credit is just a goodwill gesture, it is not. It is the thing that gets your tenant-buyer to a lender at month 18 instead of month 36. Set it at a number that actually moves the needle on a down payment calculation, document it like someone is going to scrutinize it in a loan file, and run the numbers on what happens if the lender only counts 60 percent of it.
