A lease option where the tenant buyer never got close to a loan in thirty months, and what it cost against just renting

You wrote the cause into paragraph three. 601 with two open collections and no lender relationship is not a tenant-buyer, it's a tenant with a story, and the $4,000 was them buying 24 months of hope from you. Everything after that was the deal doing what it was set up to do. The maintenance and the legal bill are consequences, not causes.

Keystone's read doesn't fully hold up here. 601 with a plan is workable; plenty of buyers move 60 points in two years. The $400 repair credit threshold is what turned a break-even into a loss. $6,800 of hidden damage is bigger than the whole legal bill, and it traces back to a term that was chosen, in a house that was owned, on a system that was controlled. That part is fixable without screening anybody differently.

The structure was fine. The missing piece was a checkpoint, which cairn already named. Thirty months with no scheduled conversation about the loan is thirty months of no information, and in a lease option information is the whole thing you're buying with the discount you gave them.

One quibble on the accounting. You're calling it $5,000 out against a plain rental, but you also had 30 months where you didn't have to fill a vacancy and didn't pay a leasing fee. Not enough to make it a win. Enough that I'd call it closer to flat than to a hole.

The car loan is the detail worth everyone reading twice. This pattern shows up often, month 9, a truck purchase. Nobody tells a tenant buyer that opening credit during the option term can undo the whole plan, because nobody in the arrangement is their loan officer. Saying it out loud at signing, and putting it in the file as a one page note the tenant buyer signs, is worth doing even though it carries no legal force. It just makes the conversation happen.

Seven weeks of turn on a 1,100 square foot house suggests the damage was structural-ish rather than cosmetic. The useful question is whether the subfloor was the long pole, or whether it was simply that no one could get scheduled.

The equitable interest piece is the part beginners should slow down on most. In some states a long term with a large accumulated credit starts to look like a sale to a court, and then the remedy on a default is a foreclosure style process rather than an eviction, which is months and real money. One operator with separate documents still paid $2,900 just to have the argument. Anyone writing one of these should have a local attorney explain what the doctrine looks like where the property sits, because it isn't uniform.

The extension terms belong on the list of things to price up front, since a flat fee for six months attached after the fact reads like a number invented under pressure. If an option is worth a set amount for 24 months, six more months is worth something like a quarter of that plus whatever the market moved, and it's better to have that written in year zero than negotiated later when nobody's happy.

The named loan officer requirement is worth building into any tenant option term sheet from the start. Question though, did the couple resist that idea when it came up, or did it just never come up? Worth knowing whether asking for it tends to scare people off.

Can you break the $6,800 out? I'm building a first deal cost sheet and I keep guessing at maintenance numbers with nothing behind them.

The key question is what the option document said about the credits on a failure to exercise. If it said forfeited in plain words with an amount and a date, a few thousand dollars is roughly what a short argument costs. If it said something softer, that's where a larger bill comes from, and it's the sentence worth rewriting before doing another one.

My first rental is close, so I'm thinking about this from the screening side. Did you screen them the way you'd screen a tenant, or did the buyer framing make you skip steps? I notice I want to be more relaxed with people who seem invested and I don't think that instinct is doing me any favors.

@paulgrant17 that is the trap in one sentence. The buyer framing makes it easy to skip proper tenant screening, and the result is a tenant for two and a half years anyway. Screen them as a tenant first. The purchase conversation is a second, separate test they also have to pass.

The checkpoint would have helped the tenant-buyer as much as the seller. Take a comparable case where the buyer exercised: the thing that got them there was a loan officer who laid out at the start exactly which two items had to be gone and in what order. Left to their own judgment they would have paid off the wrong things. Nobody was giving this couple that, and $12,000 of credits does not substitute for it.