General Landlording & Rental Properties

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Xin Z.
  • Plano, TX
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Tenant wants to buy my house

Xin Z.
  • Plano, TX
Posted Mar 7 2015, 10:07

My tenant wants to buy my house but comes up with an offer lower than market.  She said if the inspection finds everything is right about the house then she can consider a higher offer.  Should I allow her to hire an inspection on the house?  

I don't have any plans to sell the house myself but the tenant is very interested in buying it.  Your comments and advice is greatly appreciated!

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Joe Schwartzbauer
  • Investor
  • Saint Paul, MN
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Joe Schwartzbauer
  • Investor
  • Saint Paul, MN
Replied Mar 7 2015, 10:13

Is this a good tenant? What class is the property in? A? B? C type neighborhood and home? How is her credit? Do you have equity in the property? Offering a lease option or a contract for deed could be a good route for you. Often times tenants are not able to meet the 3 or 5 year balloon payment requirements and you will get the property back. Looking forward to hearing your answers to give you clearer advise. Thank you!

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Brian Gibbons
  • Investor
  • Sherman Oaks, CA
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Brian Gibbons
  • Investor
  • Sherman Oaks, CA
Replied Mar 7 2015, 10:18

When I don't like about this conversation that you giving us is that the tenant seems to be bossing you around a little bit, offering you a low price. 

When you help them rent to own it should be a good price for you whether it's the payment or the purchase price.

When you asked for advice on BP please just talk about the numbers, what's market rent, what's the property worth, what's the loans against it,and the equity.

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Xin Z.
  • Plano, TX
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Xin Z.
  • Plano, TX
Replied Mar 7 2015, 10:33

Thanks @Brian Gibbons @Joe Schwartzbauer for your comments!  I bought the house just last year in a class A neighborhood with very good schools.  My goal was to hold it for a long time because I believe the area will appreciate due to strong job growth and good schools.  This tenant is very interested in buying the house but her offer number is $10k lower than my purchase price.  I have done some rehabs to the house before renting it, so the market value is even higher based on comps.  

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Joe Schwartzbauer
  • Investor
  • Saint Paul, MN
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Joe Schwartzbauer
  • Investor
  • Saint Paul, MN
Replied Mar 7 2015, 10:38

Sounds like you have a great property that you should hold onto. Tell the tenant that you currently wish to hold the property. If they decide to move out at the end of their lease you should have no problems finding a new tenant. Happy investing!

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Michael Hicks
  • Real Estate Investor
  • Rossville, GA
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Michael Hicks
  • Real Estate Investor
  • Rossville, GA
Replied Mar 7 2015, 10:44

@Xin Z.   You need to set the price you want and then adjust to her home inspection if that is what you want to do.  I would never agree to a low ball offer with a chance of raising the price.  I've never had a home inspector come back and say everything is great.  The client is essentially paying a home inspector to find problems.  So more than likely she will want to offer even less.  If I received a low ball offer I would just respond that it's not for sale.  All of this is assuming you didn't pay too much when you purchased.  Hard to say without any numbers.  As long as you're cash flowing, stick to your plan.  Just my 2 cents.

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Xin Z.
  • Plano, TX
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Xin Z.
  • Plano, TX
Replied Mar 7 2015, 10:47

The tenant wants to stay if I decide not to sell it.  She pays her rent on time but has been quite bossy on small stuff.  I try to adhere to the lease agreement and not to let her personality control it.

The current market has very little inventory.  It will be very hard to find a similar investment deal now if I sell it.  Guess I will just tell her I am not going to sell at this time.

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Xin Z.
  • Plano, TX
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Xin Z.
  • Plano, TX
Replied Mar 7 2015, 10:52

@Michael Hicks  Great advice!  You are right on that she will probably make a even lower offer after the inspection.  The house is cash flowing fine right now, so I guess there is no need to do the inspection under the current situation.  Thanks everyone for your comments!

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Brian Gibbons
  • Investor
  • Sherman Oaks, CA
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Brian Gibbons
  • Investor
  • Sherman Oaks, CA
Replied Mar 7 2015, 11:38

You can sell this house on owner financing and get a great price and get maybe even more money per month but you need to understand owner financing if it's a house the people really want to own

Www.sellerfinanceconsultants.com can help you sell one owner finance and underwrite the buyer

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Lee Kendall
  • Flipper
  • Ocean City , MD
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Lee Kendall
  • Flipper
  • Ocean City , MD
Replied Mar 7 2015, 11:44

Have you tried countering? They obviously know what you paid for the house since it's public record. Aren't you in the business to make money? I wouldn't even consider 10k less or even break even especially after you put money in and closing costs etc.. Unless your in a bind and need the cash

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Lynn McGeein
  • Real Estate Agent
  • Virginia Beach, VA
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Lynn McGeein
  • Real Estate Agent
  • Virginia Beach, VA
Replied Mar 7 2015, 14:10
Originally posted by @Xin Z.:

The tenant wants to stay if I decide not to sell it.  She pays her rent on time but has been quite bossy on small stuff.  I try to adhere to the lease agreement and not to let her personality control it.

The current market has very little inventory.  It will be very hard to find a similar investment deal now if I sell it.  Guess I will just tell her I am not going to sell at this time.

 Personally, I would come up with a number where I would be happy to sell, even though it will likely be much higher than she is thinking, then let her know what it is and to let you know if she's interested at that level.  If not, happy to keep it.  Unless I really didn't want to sell it -- as you said, it might be very hard to find another good deal in the area you want.  In which case, I'd probably tell her I didn't invest in this to sell it, and definitely not at the price she is offering.   I had a tenant once where he wanted to buy, agreed on a price, then had his two big huge brothers or uncles or something there when I brought over the contract to sign with the price we agreed on, towering over me and telling me why he should get it for thousands less, and they're not going to let him sign it until I come down on the price.  I can't stand bossy people.  I told them that if he didn't want it at the price we agreed on, a very fair price, I'm happy to give him his notice today as he's not the only one interested, and I could get more for it once it's vacant, anyway.  His choice.  He signed the paperwork and it went smoothly after that.       

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Xin Z.
  • Plano, TX
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Xin Z.
  • Plano, TX
Replied Mar 7 2015, 14:33

@Brian Gibbons Thanks for the website and info on owner financing!  This particular tenant wants to pay cash (she said the money is from her dad).  I so have another tenant at a different property interested in buying so I will definitely explore the owner financing option with them.

@Lee Kendall I did counter a fair market price but she will only consider the price if the house has no problems.  She wants to do the inspection first and then consider my offer price based on inspection results.  Knowing her personality and the nature of inspection, I doubt she would raise her price at all.  On the other hand, I am quite reluctant to sell due to the lack of new investment opportunity in this area.

@Lynn McGeein Thanks for sharing your experience on dealing with this kind of situations!  My local market doesn't have much inventory thus I have several tenants interested in buying my houses.  If dealt properly, this could be a win-win situation for both tenant and owner.

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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
Replied Mar 7 2015, 14:36

Don't lose sleep over this...don't sell...

Revise the lease agreement to state something like "lessee (Name) has 'first right of refusal to purchase'" ....something like that.  She likes the house (her home) and doesn't want to lose it.  This should give her piece of mind.   Just my 2 cents!

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Xin Z.
  • Plano, TX
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Xin Z.
  • Plano, TX
Replied Mar 7 2015, 14:40

@Patricia Newman Would that term make it harder for me to sell the house in the future?  The tenant does like the house a lot.

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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
Replied Mar 7 2015, 15:02

Zin -

Not at all! You advertise the house for sale - you get offers - she puts in her offer.  You accept the highest offer - she has to meet that offer, or no go.  A phone call to a real estate attorney will be able to help you word it.  Especially if you have more than one tenant who wants to buy your houses.  Your tenants love their homes and don't want them to be sold from under them...that's it, pure and simple.  The wording will give them piece of mind.

When you do sell, it will be capital gains - are you ready for that.  I don't make a move without first talking to my CPA.

It's a Seller's market right now - no inventory in your area.  Are interest rates going higher in the near future?  How is the employment rate?  How will this impact your potential buyers?  Will the value of real estate come down because interest rates are going up? 

When you are ready to sell to them. have them pre-qualify for their maximum loan amount and the terms - VA, FHA, conventional with ? % down. I wouldn't waste my time until they have a letter of qualification from their lender. As for the all cash lady, that's probably all she has and that's why she is low-balling you - something to consider.

Good Luck!

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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
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Patricia Newman
  • Real Estate Investor
  • Redmond, WA
Replied Mar 7 2015, 15:26

Zen,

Do you have a Business Plan?  What is your long-term goal?  Monthly income?

Write it all out and keep refining it - 5 years from now, 10 years from now - Net Worth?

When you are ready to sell:

1) Ad states FSBO + Buyer Agent cooperation (the commission costs can be added to the offer). If inventory is that low, all agents will be getting their buyers out there to see the house, perhaps creating a bidding war. I have seen this repeatedly. If appraisal doesn't come in - they have to put more money down (just something to consider).

2) Cash is king - you are freeing up your capital

3) Spring is always a good time to sell with all the flowers are in bloom!

Patti

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Cassandra Brown
  • Tavares, FL
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Cassandra Brown
  • Tavares, FL
Replied Jan 28 2018, 09:12

I have been renting my home for 6 years and the owner has decided to sell. Does rent to own have any retro action? If I wanted to purchase how should I proceed?

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Dale T.
  • Investor
  • Greeley, CO
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Dale T.
  • Investor
  • Greeley, CO
Replied Feb 9 2018, 22:38

It it is up to you.  If you don't want to sell the property, don't sell it.  Do not let someone bully you into making a decision.   

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Nathan Williams
  • Flipper/Rehabber
  • Norfolk, VA
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Nathan Williams
  • Flipper/Rehabber
  • Norfolk, VA
Replied Apr 5 2019, 13:40

Learn how to calculate what you would sell the house to her for. Tell her you'll consider letting her buy it if she pays above whatever you calculate. If not, have fun renting. And NO, don't let her do an inspection on it! She'll find stuff that YOU need to fix. It will come out of YOUR wallet.

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Jason D.
  • Rental Property Investor
  • St. Petersburg, Fl
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Jason D.
  • Rental Property Investor
  • St. Petersburg, Fl
Replied Apr 5 2019, 13:58

@Xin Z. You sell when you're "very interested in selling" not when the tenant is "very interested in buying"

If you want to sell, put it on the market and let the market tell you what it's worth.

If it's a long term play, like it sounds, keep it and keep making money.

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Ned J.
  • Investor
  • Manteca, CA
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Ned J.
  • Investor
  • Manteca, CA
Replied Apr 5 2019, 14:21

Nope.... unless she offers you a price you just can't refuse, then why sell it? Everything is for sale....at the right price. She isn't even in the ballpark of the right price. You need to figure out market value, closing costs for the sale, capital gains etc and then set your price you are willing to sell....and it aint 10k less than you paid for it....not even close.

People don't go UP after an inspection.....they go DOWN 99.99999% of the time.

Unless she is willing to put in a written offer at your selling price, DO NOT do the inspection....all she will do is find stuff she will then expect you to fix as the landlord....

Unless you are desparate for $$ there is zero reason to sell at break even or a loss......