To define a lease option, it can be said that it is possession of a property by a tenant through a lease under a legal agreement with certain terms and conditions. They are generally aimed at people looking for opportunity to own a home who do not qualify for the conventional home loans for various reasons.  It is a different set of terms, flexible, personalized and a completely legal and accepted form of property transactions. The lease agreement is binding and is acknowledged by both parties if either of the party fails to abide by the terms the affected party can contest in the court of law.To ensure that the interests of both parties are protected it is advisable to get the lease agreement or contract prepared by a solicitor who specializes in lease formalities. The lease option can also be notarized to prevent any issues later on.  The person leasing the property has the right to buy it but there is no obligation to buy the property.  The aim of lease option is to help the lessor to buy the property.  

Lease option best suits people who usually fall under any one of the following categories:

1. Those who cannot access traditional financing due to the strict lending rules of the banks and traditional lending institutions.
2. People with bad credit or no credit history which is an important requirement for obtaining home loans.
3. Those who not have enough savings to meet the down payment requirement which is at least 5% of the loan amount.  Unable to save for the deposit people look for alternative forms of funding their home ownership.
4. People who cannot present salary records and tax or any records as financial assets.
5. Those who want to lease now and save money for buying later when they are capable of paying off the property and escape the rental trap.

The two major components in this system are the lease to a tenant and the option entitling the tenant to buy the property at a later date at a price agreed upon at the time of agreement.  The seller of the property is bound by the contract to sell it only to the tenant till the expiry of the contract.  The expiry date is of vital importance as the transaction has to be completed within the specified period failing which the agreement becomes null and void.  When both parties carry out their parts under the contract it is beneficial to both the parties. The home owner or the seller benefits in many ways by selling his property this way.  He can collect higher interest rate than what he pays for its original mortgage. Thus he creates a steady cash flow. He owner also sells the property quickly when market demand is low. The home owners can buy larger houses by using the older house to generate extra money. The extra cash flow for more investment or asset creation.  The home owner also enjoys tax benefits.  Lease option is a good choice for property investors to make money using their properties.