A Lease option is a Lease, which is a rental agreement and a Option to buy the real estate at a set price.
I’ve used this structure to sell to my houses to 1st time buyers who cannot otherwise qualify. It is totally legal and used often.
People who have been in a lease option for a while can “refinance” and pay off the lease option. Remember to save your canceled payment checks as they will be needed.
My advice:
For Landlord/Seller: Do not let the tenant/option holder record the lease option because if they stop making payments, it will cost you a lot of money in legal fees to clear your title. If you are dealing with someone with limited English, make sure to record the transaction so he cannot say to a judge that he did not know what he was doing. (this has happened to me)
For Buyer/renter/optionee: Get the lease and the option notarized at your local bank and run down to your county recorder’s office and have it recorded in the deed of the property. This will prevent the seller from adding more debt or selling the property from under you.
I hope this helps.