How Do You Do A Lease Option In Texas And Other Restrictive States?

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You can still do lease options in Texas but you have to structure them differently after six months. Here’s how.
 

“How do you do your For Rent Method in North Carolina and Texas?” – Mike Manahan, Missouri

 
Joe: Texas has its own special little world and the way they do things is very different. I’ve had several people ask about Texas. Let me get into the Texas issue for you here, because it’s more restrictive than North Carolina.
 
Joe: Texas has new legislation that’s about a year old about lease options. They don’t outlaw lease options. They just make you do a lot of disclosure with them. I think that it’s so onerous that it’s not worth doing in Texas that way. That’s only for lease options that are more than six months.
 
Joe: What I suggest you do is you do a lease option for six months and then turn it into a land contract. That land contract can last for another six months, at which time they can refinance the property. Come to think of it, I would do another 12 months after the lease option.
 
Joe: So, within six months, if they make their payments on time, then it will be converted into a land contract for 12 months. A land contract then lasts for 12 months, and after that time, on a land contract, you can refinance the loan rather than getting a new purchased money mortgage for it, which makes it a little easier because the qualifications are a little less and you don’t need a down payment. It’s a much better way to finance a property to refinance than it is to do it as an original purchase.
 
Joe: After 18 months, they’re able to buy the property. If they don’t, their contract expires and then the property comes back to you. That’s the easiest way to do it in Texas, in my opinion. You can still advertise it as a lease option, which is the way that we get the most leads, and just do a different structure. I hope that helps.