Posted by John Corey on May 27, 2006 at 12:18:30:
Break down the deal.
You need to acquire or otherwise control a property. You can do so any number of ways including a lease option where you are buying.
You are then going to turn around and lease option the property out to a tenant buyer. You would be the landlord.
If you receive cash from the tenant buyer you can choose how you deal with the cash after you pay what you have agreed to pay (loan payment, lease payment - what ever was agreed when you purchased).
If you want to credit X of the tenant buyer’s rent to the eventual purchase it is generally wise to make sure that you are building up equity in a similar fashion. A credit of an equal amount paid to the original seller on a lease option or a pay down of the equity if you took out new financing.
Get out a piece of paper or a spreadsheet and look at the two sides of the deal separately. Then see if the cash flows line up. Even if they do not exactly line up with the end points line up when the tenant buyer wants to exercise the option?