The Terms of Your Lease Option

If they miss a rent payment or are late by one day, they lose all their
option money. If you rent out an apartment, what’s the tenants’ incentive
to pay on time? Not much. If they’re late, they pay a measly little
late fee.
What’s the number one complaint all landlords have against renters?
They damage the place and don’t take care of it. Are you shocked? Have
you ever rented a car? You are no doubt nice, honest, and ethical. When
you rent that car, how do you treat it? Do you drive over the bumps in
the parking lot, take the curb, do some donuts? Let’s floor it, see what
this little rental car can really do, drink a Coke, throw it in the back seat,
right? Don’t we all tend do the same? Why? It’s not that we’re bad; it’s
just that it’s not ours.

Perform Regular Inspections
How do you make sure that the property is not being destroyed and that
your tenants are doing the repairs they are supposed to do? In every lease
and lease option, you have the right to inspect the property every 30 days.
I predetermine my inspection date in writing. For example, I say, “On the
second Tuesday of every month, during business hours, I have the right to
go in and inspect for repairs, check the air-conditioning filters, spray for
bugs.” Inspect it every 30 days; if you don’t, you could be shocked at what
you find.

When you lease-option, tell your tenants they’re on a home-ownership
program, that this is their house. They’re going to fix it up. It’s theirs.
Way to go. They own it. They’re buying it. They’re lease-optioning it.
They may plant some flowers, paint, maybe put a porch on the back. If
they’re homeowners, they take care of it.
■ If they’re late on the rent, they lose the option money.
■ If they don’t buy within a year, they lose the option money.
■ If they do any damage or don’t do the repairs, they lose the option
■ If they don’t close on a new mortgage within a year, they lose the
option money.
In my landlord course, I explain that all my rent is due on the first of the
month, late on the fifth, and we evict on the eleventh. This is my policy
and procedure. I promise you if tenants can’t pay this month’s rent, they
probably can’t pay three months’ rent if you let them stay in your rental
Do you remember when, during the Vietnam War, the Chinese captured
some patriotic, red-blooded, dedicated Americans and put them on television
and forced them to say “America is not a great country”? How did
the Chinese torturers get them to do it? They used the psychological
technique based on the idea that if you put it in writing, you can’t deny it.
They’d start out very generally and have them write a report detailing
problems in America, and, of course, the valiant American POWs said
there were no problems, no way, they wouldn’t write, they wouldn’t
cooperate. Then the Chinese said, come on, there are race problems,
poverty problems, some type of little problems. Just a little one, write it