Hi all, Rob here, a Louisville agent who works mostly with investors.

Two people want the same house. The seller can't drop the price. The buyer can't get the loan. Not this year. A lease option doesn't need anybody to give. It needs time, and time is the one thing both of those people have.

A lease option is two pieces of paper. Paper one is a normal landlord-and-tenant lease. Paper two is an option: the tenant gets the right, not the obligation, to buy the house at a price you agree on today, any time before a date you agree on today. Keep them as two separate documents.

Five things you negotiate: the option fee (usually 1% to 5% of the price, non-refundable, and it counts toward the price when they buy), the term (24 to 36 months), the strike price (just means the agreed purchase price), the rent, and who fixes what. The landlord keeps taxes, insurance, roof and furnace.

Here's the mistake I see taught everywhere. "$300 a month of your rent goes toward your down payment." Then the tenant-buyer walks into a lender two years later with what they think is $7,200, and the lender tells them they have zero. Fannie Mae says a rent credit only counts if it's rent paid above market rent. FHA says the same. If the house rents for $1,800 and they paid $1,800, there's no credit, no matter what the lease called it.

So build it the way the lender reads it. Market rent is $1,800. Charge $1,950. The $150 above market is the credit. Write it in the lease, collect it every month, keep the proof. After 24 months that's $3,600 of real down payment money a lender will count.

Now the sandwich, with real numbers. A vacant house listed at $250,000 has sat 150 days. You lease it from the owner at $1,700 a month with an option to buy at $245,000 within 36 months, and you pay the owner a $2,500 option fee. You lease it to a tenant-buyer at $1,950 a month with an option to buy from you at $265,000 within 24 months. They pay you an $8,000 option fee, and they earn that $150-a-month credit.

Up front: $8,000 in, $2,500 out. $5,500 in your pocket.

Every month: $1,950 in, $1,700 out. $250 x 24 months = $6,000.

At closing: they pay $265,000, minus their $8,000 fee and $3,600 in credits, so $253,400 comes in. You pay the owner $245,000, minus the $2,500 you already paid. $10,900.

About $22,000 over two years on a house you never bought. The owner stops paying for an empty house next month and gets a sale this winter's market wasn't going to give them.

One rule you never break: your option with the owner has to last longer than your tenant-buyer's option with you. 36 months above, 24 below. Always. And keep a few months of rent in reserve, because if your tenant-buyer stops paying, you still owe the owner.

Build it clean. Two separate documents. Record a memorandum of option with the county clerk, a one-page public notice so the owner can't sell or refinance out from under the tenant-buyer. Keep the option fee and the security deposit separate. The landlord keeps taxes, insurance and major repairs, because if you push all of that onto the tenant, a Kentucky court can treat it like a land contract, which means a foreclosure instead of an eviction. Write your screening criteria down before the first applicant, same for everyone. And have your attorney look it over before anybody signs. Not legal advice.

For anyone who has done one: what went sideways first, the tenant-buyer who couldn't close or the owner who got cold feet?