Does it make sense to rent a property back to seller?

Question

Hi BP Team,

I am in the process of making an offer on a home, but the seller wants to rent it back for six months which doesn't make sense to me. Please note that l like the property and the rent the seller wants to pay is reasonable, based on comps in the area. However, l'm not sure if l'll be able to get a good tenant in January 2019 when he vacates the property. August seems to be great month for renting because it marks the beginning of the school year. One question l keep asking myself is"why can't the property owner sell the property in January 2019 when he is ready to get rid of it"? Please let me know if anybody has done this in the past. What are the pros and cons?

Thanks for your time,

David

Tyler Mullen · Answer

A rent back is also very common within 30 miles of Seattle. If you market is tight and they want the rent back through Jan, I get your issue with the timing. Seller is selling in summer for highest price and they wan to rent or buy in winter at lowest price of the season, crafty.

Ask for a higher rent, like 30-40% higher. That will make the rent effectively through March - April, then figure you need a month or so to make repairs... you're right back in the think of rental season!

David Nutakor · Answer

Account Closed, my seller has a similar story. His new house is under construction and supposed to be completed in late January 2019. It's comforting to know that this is common in the RE business. Thanks for your contribution.

Account Closed · Answer

I just had a seller wanting to do a rent back on my primary home that I just bought. They were waiting for their new home to be completed (because it was not done by the time we went to closing), but at the last minute, I guess they finished it because the seller no longer needed the rent back. In addition, I had a rate lock which was getting ready to expire!

David Nutakor · Answer

Good idea @Andrew Boettcher. I'll discuss it with my agent. Thanks for your input.

Andrew B. · Answer

Rentbacks are not unheard of in my neck of the woods either. usually its for short term periods though, and you get a nice premium. If I were in your shoes, I would put in the contract that $10-$15k (depending on cost of property) stays in escrow until the house is vacant, with the stipulation that if they do not leave on time that money is used towards their eviction costs. This gives them incentive to leave at the end.

David Nutakor · Answer

Sounds good @Tyler Mullen.

David Nutakor · Answer

That's good to know. Thanks for the quick response @Russell Brazil. I appreciate it.

Russell Brazil · Answer

Rent backs are very normal in my market.

Does it make sense to rent a property back to seller?

Does it make sense to rent a property back to seller?

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