Lease Option
Creative FinanceA lease option is two agreements in one: a lease to rent the property, plus an option to buy it at a locked-in price within a set window. The tenant pays an upfront option fee for that right, and often a portion of each month’s rent is credited toward the eventual purchase (a rent credit). Crucially, it’s an option, not an obligation — the tenant-buyer can buy, but doesn’t have to.
Why people use it. It lets a buyer who can’t qualify for a mortgage yet lock in today’s price and build toward ownership while renting, and it gives the seller income plus a committed future sale. It’s loosely called rent-to-own, though the exact terms vary widely.
A lease option is legally distinct from a contract for deed. Depending on structure and state, courts can recharacterize a lease option as an equitable mortgage or a disguised sale, triggering foreclosure and disclosure rules. Structure it with an attorney.
For structuring, rent credits, the sandwich variant, and legal traps, see lease options & rent-to-own.