My tenant-buyer never got close to a loan in thirty months

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.

I don't fully agree with keystone. 601 with a plan is workable, plenty of people move 60 points in two years. The $400 repair threshold is what turned a break-even into a loss. $6,800 of hidden damage is bigger than the whole legal bill and it came from a term you chose, in a house you owned, on a system you controlled. That one's 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 I want everyone to read twice. Mine did the same thing, month 9, bought a truck. 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. I now say it out loud at signing and put it in the file as a one page note they sign. It has no legal force I'm aware of, it just makes the conversation happen.

Seven weeks of turn on a 1,100 square foot house tells me the damage was structural-ish rather than cosmetic. Was the subfloor the long pole, or was it that you couldn't get anyone scheduled?

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

I'd add the extension to the list of things to price up front, since cairn's $1,500 for six months reads like a number invented under pressure. If the option is worth $4,000 for 24 months, six more months is worth something like a quarter of that plus whatever the market moved, and you're better off having written it in year zero when nobody's disappointed.

This is the exact thread I needed while I'm drafting a term sheet for my own tenant. The named loan officer requirement is going in. Question though, did the couple resist that idea when you brought it up, or did it just never come up? I'm trying to work out whether asking for it scares 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.

You said the option was separate, which saved you. What did the option document say about the credits on a failure to exercise? If it said forfeited in plain words with an amount and a date, $2,900 is roughly what a short argument costs. If it said something softer, that's where the bill came from, and it's the sentence I'd rewrite 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.

@wren that's the trap in one sentence. The buyer framing makes people skip the tenant screening, and then you have 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 your tenant-buyer as much as it helped you. I exercised on mine and the thing that got me there was a loan officer who told me at the start exactly which two items had to be gone and in what order. Left to my own judgment I'd have paid the wrong things off. Nobody was giving your couple that and $12,000 of credits doesn't substitute for it.