I am in a dilemma. Bare with me, its complicated.
My Grandmother owns a rental (4b 2b with unfinished besement and pool) that was purchased with the intention of my Dad to tear down the old house with a pool, and split into 3 lots to build new homes. After acquisition she decided she wanted to live there. My dad spent MONTHS renovating it. He split the lot into two, and built one new home and sold it. and of course she never moved into the original house.
They rented the house right when the recession hit in 2009 or 2010 for 1500/mo. to a married couple. He was a musician and she ran her hair/esthetician business out of the back entry room. During that time I remember they had a hard time paying rent and the rent was never increased. There were talks of the couple buying with some sort of lease with option to buy. But no one can tell me the terms that were discussed. (The house has been managed poorly and unprofessionally)
In April the tenants divorced because his cover band got some notoriety and left for another woman. This is where I come in.
last October 2019 grandma asked me to collect the rent for her as the tenant had 3 mo. Rent in cash that they hadn't been able to connect with my grandmother to pay her. then in late April 2020 she asked me if I had been collecting the rent (I had no idea she thought I would continue to do so. I thought it was a one time thing)
I went to collect and found out that they had divorced. And the original tenant brought in a friend as a roommate. They signed a one year lease with my grandmother for the same amount $1500/mo (the lease agreement is a hand written agreement on one sheet of paper through March 2021)
the original tenant said she still hopes my grandmother will sell to her, now with her friend and new tenant. The new tenant has taken the lead in communicating with me.
there is a lot of differed matenance. And since COVID hit, the both of them had been shut down for work. (They are both in the esthetician business and those were the first services shut down in WA State) They talked to my grandmother about having some matinance completed with credit toward the rent. And when they were locked down because of COVID they decided to start having things done with conversation of credit toward rent. Now that they want to move forward with buying, I feel like they are trying to get all of the big stuff taken care of on grandmas dime before they own it. Everything is a priority now, when i know some of these issues were never followed up on before they expected to go ahead with the purchase.
My quandary is, My Dad who used to manage the property has been in bad health and now lives with me as his care taker. My grandmother intends for this rental to benefit my dad as income and she wants to get it out of her name and into a trust to benefit him and his family (my me and my brother)
now that they are coming at her with all of these repairs and expenses, she's getting upset and wants to sell the house and let them make a counter offer if someone makes an offer. She is starting to have problems with dementia and I can never make any progress on hiring a real estate attorney or bring in a property management company to get a proper lease in place and to help me deal with the requests for repairs that we shouldn't be required vs the things that need to be taken care of.
I'm currently trying to get Grandma to quitclaim the house into my name because it cannot be put in my dads name. I would want to keep it as a rental. Where the market rent should be $2900/mo.
But if we did move forward with the owner financing purchase i would be collecting a larger payment, without having to pay taxes and maintenance, and if they default, the house goes back to us and they either pay market rent, or leave. And I bring in new tenants and keep it managed properly.
I need to know what kind of terms I should be expecting for the owner financing before they bring a purchase agreement to me. She asked if she could put together a purchase agreement soon. Maybe October.
if you made it this far, what are your thoughts?
frustrated and confused.
Geese, we didn’t need to read all that to get your basic question....
Usually, these don’t work out.
Do no transfer title and take back a mtg...then you’d have to foreclose. Do a Land Contract or whatever they call it there.
1) simply don’t do it
If you do it....
2) Most importantly...have Your attorney prepare the document and advise.
I would suggest avoiding moving forward with anything with these tenants. From what I gather, its been ran less like a business in the past and that's what the tenants are used to, which means if you take it over, they will continue with that expectation, whereas it sounds like you want to run this like an actual business (no offense to your family). It will be tough to overcome those expectations. I suggest if you get it in your name, to give them notice and get it re-rented at market rent. In NC there is something called life-estates, a way of holding title. That might be something to investigate for you and your dad to investigate and make your grandmother more comfortable with deeding it over.
@Ryan Howell yeah, I tend to agree with you. I've veen wondering how I would handle raising the rent to the current market. And no offense, my grandmother is a smart woman, but still has simple ideas like a verbal agreement should be fine. Its been difficult to say the least.
Talk to your grandmother and tell her what market value is (for rent and to sell). Do an inspection of the house and see what needs to be done and how much that would cost. Once you have those numbers, I'm betting your grandmother will be shocked and may choose to sell to someone else.