We try to get between $2k and $3k as a lease option fee - more if we can. This is where we make our money so our goal is to get a much as possible. Also, the more we get as a down payment, the more stable the tenant is for you, so it benefits us both
Less than 30% of lease option buyers will exercise the option. So it is likely that they will not buy it at the end. But there are some real benefits -
It doesn't cost you a dime to fill the property. That is what we do and we are paid by the buyer.
You no longer have to lose your mortgage or property tax payment every month since you will offset it with the monthly income.
You don't have to do maintenance on the property - the new buyer/tenant is responsible for repairs.
You don't pay for utilities.
They cut their own grass and shovel their own snow.
They don't call you like regular tenants.
You get a 3 years lease rather than 1 year for most renters.
You get a more stable tenant than a regular renter because the folks that move in see themselves as owners rather than renters. Remember the old adage, "You don't wash a rental car." Same goes for buyers vs. tenants of houses.
It is non-refundable to the buyer. When they end their lease, we would be happy to help you fill the property again - we have a very active and growing list of buyers.
This is all the responsibility of the buyers.
How do buyers get financing when it's time to exercise their option?
They go to any conventional lender and apply for a loan. The reason they are buying "Rent To Buy" right now is because they do not qualify for a conventional loan. Since 2007, conventional loans have become much harder to qualify for - ask any mortgage broker. That is why so many properties that are for sale by real estate brokers don't sell. Buyers just can't get loans without almost perfect credit. Appraisals have also been a problem recently, so even if the Buyer qualifies, if the appraisal doesn't come in, they won't be able to finance it.
Our goal is to help good, responsible people get into a home. People who will take care of it and treat it like their own. We've had good luck finding just that over the years.
If the Buyer exercises the option, that's great and you make your money. If they don't, the advantages of having someone pay your mortgage and buy a house for you are enormous.