Lease Option

An agreement that gives a tenant the right, but not the obligation, to purchase the rental property at a predetermined price within a specified time frame. The tenant pays an option fee (usually 1-3% of the price) that may be credited toward the purchase. Popular with tenants who need time to qualify for a mortgage. As a landlord, you get a motivated tenant who treats the property like an owner. The risk is that they do not exercise the option and you have limited your ability to sell during the option period.