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Lease Option Calculator
Run a rent-to-own lease option deal from both sides. See the down payment the tenant-buyer builds from option fee plus rent credits, the premium they pay in above-market rent, and the break-even appreciation the seller is effectively locking in.
Option terms
1% to 5% of purchase price is typical; usually non-refundable but credited at closing.
Rent and credits
The portion of monthly rent above market is the premium you pay for the option.
Portion of each rent payment applied toward purchase price at closing.
Market assumption
Used to project market value at the end of the option term for comparison to the locked-in price.
Down payment equivalent at closing
$28,800
8.0% of purchase price
Rent credits over term
$21,600
$600/month
Projected market value at end
$393,382
$33,382 above locked-in price
Effective purchase price
$331,200
after credits and option fee
Cost of the option to the tenant-buyer
Down payment equivalent is still light relative to price. Negotiate a larger option fee, a higher rent credit percent, or a longer option term if you need more time to save or qualify.
Rent premium over market
$300/mo
$10,800 over term
Total tenant outlay
$93,600
option + all rent payments
Break-even appreciation to justify premium
1.64%
annualized
Lease options are not mortgages. The tenant-buyer must still qualify for financing at the end of the option term. If they do not exercise the option, the option fee and rent credits are usually forfeited.
How to Use
- Enter the locked-in purchase price agreed in the option contract and the upfront non-refundable option fee.
- Enter the monthly rent under the lease and the comparable market rent for the same property — the difference is the premium the tenant-buyer is paying for the option.
- Set the rent credit percent — the portion of each rent payment that the seller agrees to credit toward purchase price at closing.
- Set the option term in months (24 to 36 is typical) and an expected annual appreciation rate.
- Review the down payment equivalent, effective purchase price, and break-even appreciation the tenant-buyer needs to justify the premium.
Frequently Asked Questions
What is a lease option?
A lease option is two contracts: a lease that lets a tenant live in the property and an option that gives them the exclusive right (but not the obligation) to buy the property at a pre-agreed price during the option term. They pay an upfront option fee and sometimes receive rent credits toward the purchase.
How is a lease option different from a land contract?
A land contract (contract for deed) is a seller-financed sale — the buyer takes possession and begins paying principal and interest, but the seller keeps the deed until the contract is paid off. A lease option is a lease with a purchase option; the tenant-buyer has no ownership interest until they exercise and close.
Is the option fee refundable?
Usually no. The option fee is compensation to the seller for taking the property off the market and granting the right to buy. If the tenant-buyer does not exercise, the fee is forfeited. It is typically credited toward the purchase price if they do exercise.
What is a rent credit?
A rent credit is the portion of each monthly rent payment that is applied toward the agreed purchase price at closing. A 25% rent credit on $2,400/month rent means $600/month accrues toward the down payment — but only if the contract actually credits it, and only if the tenant exercises.
Do lease options work for the seller?
They can, especially in slower markets or with a property that is hard to sell. Sellers get above-market rent, a non-refundable option fee, and a pool of qualified tenant-buyers. The downside is a locked-in sale price — if the market appreciates faster than the option term, the seller gives up that upside.
Related Calculators
Seller Carry Calculator
If you want the seller to carry the financing after exercise, model the owner-financed note terms here.
Rent vs Buy Calculator
Compare a straight rent vs buy decision if the lease option terms feel off.
Down Payment Savings Calculator
Plan a savings glide path so the tenant-buyer has the cash to close when the option term ends.
Mortgage Calculator
Estimate the mortgage the tenant-buyer will need to qualify for to exercise the option.
Rental Cash Flow Calculator
If you are the seller, model the interim cash flow from the above-market lease rent.
Home Affordability Calculator
Check whether the locked-in purchase price will be affordable when the option term ends.
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