What is a "lease option" in real estate?

A "lease option" in real estate is fundamentally an agreement that combines a lease with an option to purchase the property at a later date. This arrangement allows tenants to rent a property while also establishing the right to buy it during or at the end of the lease term.

In this scenario, the tenant pays a rental price and typically an additional fee for the option to purchase, which is often applied toward the down payment if the tenant decides to proceed with the purchase. This can be particularly appealing for tenants who may not be ready to buy immediately but wish to secure the opportunity to buy the property in the future, providing flexibility and a pathway to homeownership.

The other options do not encapsulate the key elements of a lease option. A short-term rental contract pertains solely to renting without purchase intent. A lease that cannot be renewed refers strictly to the termination of the lease without any buy-in option. Lastly, a co-ownership agreement between tenants does not relate to leasing or the option to purchase a property but deals more with how ownership is shared among individuals.