Lease option
Lease with Option to Buy: Turn Your High-Mortgage Property into a Profitable Investment
Many Phoenix property owners are stuck with mortgages from recent purchases at high interest rates, making traditional rentals cash-flow negative. A lease with option to buy strategy transforms your burden into opportunity, allowing you to charge premium rents, collect a large upfront option fee, and guarantee a future sale—all while covering your mortgage.
As an Investment Sales Associate with 14+ years of Phoenix real estate experience, I help property owners structure and execute lease-option strategies that turn negative cash flow into positive returns.
This isn't for every property—but when it works, it works brilliantly.
WHY LEASE WITH OPTION TO BUY WORKS FOR HIGH-MORTGAGE PROPERT
Common Scenario:
✅ Premium Rent Pricing - Charge 15-20% above market rates
✅ Large Upfront Option Fee - $10,000-$25,000 immediate cash in your pocket
✅ 3-Year Lease Commitment - Eliminates vacancy costs and turnover expenses
✅ Guaranteed Future Sale - Locked-in buyer at predetermined price
✅ Cover Your Mortgage - Turn negative cash flow positive (or break even)
✅ Tenant Maintenance - Buyers-in-waiting take better care of the property
✅ Tax Benefits - Continue claiming depreciation and deductions while collecting premium rent
THE HIGH-MORTGAGE PROBLEM IN PHOENIX
Common Scenario:
Property Value: $450,000
Your Mortgage Payment: $3,200/month (purchased 2022-2024 at high rates)
Market Rent: $2,400/month
Monthly Loss: -$800
Annual Loss: -$9,600The Dilemma:
- Selling now means paying high commissions and possibly losing money
- Traditional renting creates negative cash flow you can't sustain
- Keeping it vacant is even worse
LEASE WITH OPTION TO BUY SOLUTION
Option Rent: $2,800/month (17% premium over market)
Upfront Option Fee: $15,000 (non-refundable)
Lease Term: 3 years
Purchase Price: $475,000 (locked in today)
Your New Financial Picture:
Monthly Cash Flow: -$400/month (vs. -$800 traditional rental)
Upfront Cash: $15,000 immediately
3-Year Savings vs. Traditional Rental: $14,400 ($400/month × 36 months)
Total Cash Flow Improvement: $29,400 over 3 years
Guaranteed Sale: $475,000 in 3 years (vs. uncertain market)
Plus: No vacancy, no turnover costs, tenant maintains property like an owner.
HOW LEASE WITH OPTION TO BUY WORKS FOR OWNERS
Step 1: Property Evaluation
I analyze your property, mortgage situation, and market conditions to determine if lease-option is the right strategy. Not every property qualifies—I'll give you honest assessment.
Step 2: Pricing & Structure Strategy
We determine:
- Option rent (premium above market)
- Option fee (upfront non-refundable payment)
- Purchase price (locked-in future sale price)
- Lease term (typically 2-3 years)
- Option credit structure (portion of rent applied to purchase)
Step 3: Marketing to Tenant-Buyers
I market your property to qualified tenant-buyers who:
- Have steady income but need time to improve credit
- Are self-employed or have non-traditional income
- Have down payment funds but need time to qualify for financing
- Want to "try before they buy" in a specific neighborhood
Step 4: Tenant-Buyer Screening
Rigorous screening process:
- Credit and background checks
- Income verification (must afford option rent)
- Down payment verification (option fee + future down payment)
- Interview to assess commitment and motivation
Step 5: Professional Agreement Structure
Attorney-reviewed lease-option agreements that protect your interests:
- Clear purchase terms and timelines
- Maintenance responsibilities
- Default and forfeiture clauses
- Exit strategies if buyer doesn't complete purchase
Step 6: Ongoing Management
I coordinate the lease period and facilitate the eventual sale when the tenant-buyer exercises their option (or handle re-marketing if they don't).
FINANCIAL BENEFITS FOR PROPERTY OWNERS
Traditional Rental:
Monthly Rent: $2,400
Monthly Mortgage: $3,200
Monthly Loss: -$800
Upfront Costs: First month rent ($2,400) - tenant placement fees
3-Year Cash Flow: -$28,800 loss
Lease with Option to Buy:
Monthly Option Rent: $2,800
Monthly Mortgage: $3,200
Monthly Loss: -$400 (50% reduction!)
Upfront Option Fee: $15,000 (immediate cash)
3-Year Cash Flow: +$500 net positive ($15,000 - $14,400 in losses)
Plus:
- No vacancy between tenants (3-year commitment)
- No turnover costs or re-leasing fees
- Tenant maintains property better (they plan to buy it)
- Guaranteed sale at end of term (or keep the option fee and re-lease)
WHY TENANTS PAY PREMIUM RENTS
🏠 Path to Homeownership
They're building toward ownership, not just renting. The premium rent includes option credits that reduce their future purchase price.
🎯 Exclusive Opportunity
They lock in today's purchase price and get time to improve credit, save additional down payment, or stabilize income for financing.
💰 Investment in Their Future
They're motivated buyers-in-waiting who treat the property like it's already theirs—better maintenance, longer commitment, lower risk.
🔒 Price Protection
In an appreciating market, they lock in the purchase price today and benefit from future appreciation.
PROPERTY TYPES PERFECT FOR LEASE WITH OPTION
✅ High-Mortgage Properties
Purchased 2020-2024 with high interest rates where mortgage exceeds market rent.
✅ Appreciation Markets
Properties in strong Phoenix neighborhoods where values are expected to continue rising (tenant-buyers want to lock in today's price).
✅ Move-In Ready Homes
Properties in good condition that appeal to homebuyers, not just investors. Tenant-buyers want a home they're proud to own.
✅ Desirable Neighborhoods
Areas with strong schools, low crime, and high owner-occupancy rates attract serious tenant-buyers.
✅ Single-Family Homes
Lease-options work best with traditional single-family homes (not condos or properties with restrictive HOAs).
LEGAL PROTECTIONS FOR PROPERTY OWNERS
🛡️ Professional Documentation
Attorney-reviewed lease-option agreements that clearly define:
- Purchase price, terms, and timeline
- Option fee (non-refundable)
- Monthly rent and option credits
- Maintenance and repair responsibilities
- Default and forfeiture provisions
⚖️ Exit Strategies Built In
If tenant-buyer completes purchase: You get your agreed sale price and exit the property.
If tenant-buyer doesn't complete purchase: You keep the option fee and all rent paid, then re-lease or sell the property.
If tenant defaults on lease: Standard eviction process applies; you keep option fee.
📋 Clear Terms & Expectations
Everything is documented upfront to prevent disputes and protect your investment.
RISKS & CONSIDERATIONS
Risks & Considerations (I'll Be Honest With You):
⚠️ Tenant May Not Complete Purchase
If they don't qualify for financing or change their mind, you'll need to re-market the property. (But you keep the option fee and all rent paid.)
⚠️ Property Tied Up for 2-3 Years
You can't sell to someone else during the lease-option period. Make sure you're comfortable with the locked-in sale price.
⚠️ Market Appreciation Risk
If the market appreciates significantly above your locked-in price, you miss out on additional gains. (But you also have downside protection if market declines.)
⚠️ Tenant Maintenance Expectations
Tenant-buyers may expect you to handle more repairs than typical landlords. Clear agreements prevent disputes.
My Role: I help you evaluate these risks against your specific situation and structure agreements that protect your interests.
READY TO TRANSFORM YOUR HIGH-MORTGAGE PROPERTY?
Let's calculate how much this strategy can improve your cash flow and whether your property is a good fit.
What We'll Cover:
✅ Current Cash Flow Analysis - Calculate your monthly loss with traditional rental
✅ Option Rent Pricing - Determine premium rent potential for your property
✅ Option Fee Structure - Maximize upfront cash based on market conditions
✅ Purchase Price Strategy - Lock in profitable sale price for 2-3 years out
✅ 3-Year Financial Projection - See total benefit vs. traditional rental or selling now
✅ Risk Assessment - Honest evaluation of whether this strategy fits your situation
✅ Marketing & Tenant Placement - Complete plan to find qualified tenant-buyers
No cost. No obligation. Just honest analysis of whether lease-option makes sense for YOUR property.