A very simple example (someone please fill in the details or correct if needed):
Let's say that I agree to pay 275K for a 1900 sq. ft. interior lot home on a villa wall in Virginia Trace (real home by the way). If the seller were willing to have a long term rental on the property (not a lease/buy option) she might be looking to get 2k per month for the rental and who knows if they would find a long-term renter.
But instead she may use a lease/buy option whereby I might be willing to pay the 2K per month with $750 of it being used to buy down the 275K price. After 1 year we like the house and want to convert the option. The house would be ours for 275K-9k ($750 X 12 months) = $266K left. Or I could pick up the option for another year at a specified price (probably still $2K per month) and then convert my option then. In reality the option can be converted usually at any point.
If i don't buy at least the seller has the house fully rented for the year.
Obviously this doesn't work if the seller just wants the property off their hands since it may come back to them.
Works something like that. I did one with my first house way back in 1980. I'm not sure if they have some legal issues that make them undesirable now.
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