Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
Just sold a house to a tenant and it went way too smoothly. I'm thinking about trying it again lol.
House has had the same tenants (which are great for the most part) since we bought it maybe 5 years ago. Lease is up in June. Would be a 1031 single family to a small multi situation -so I'm not in a huge hurry because properties are slow to come by at the moment.
Should I reach out and tell them I'm interested in selling? Is it possible I'll be able to smoothly sell to two tenants in a row? I have no idea if they'd be interested.
Figured I better ask here before I tell them and then they get weird on me until their lease is up.
Real Estate Agent · Nashville, TN · Member since 2020 · 77 posts · 71 votes
6y
@Luke Carl what is your biggest risk in telling them? I agree that it would be nice to let them have the earliest opportunity.
My thoughts.. it gives them time to consider looking for another place if they wish to break lease due to change, although it sounds like they probably wouldn’t from your post.
Since you had success in the first one, you might have success in this one also! It might even give them confidence to tell them that your first tenants purchased.
Investor · Sevierville, TN · Member since 2015 · 121 posts · 674 votes
6y
I'd tell them, especially since you successfully went through this process. They're going to find out either way (ie when people start showing up to inspect it), you may as well show goodwill and give them the first option.
Real Estate Agent · Nashville, TN · Member since 2020 · 77 posts · 71 votes
6y
@Luke Carl what is your biggest risk in telling them? I agree that it would be nice to let them have the earliest opportunity.
My thoughts.. it gives them time to consider looking for another place if they wish to break lease due to change, although it sounds like they probably wouldn’t from your post.
Since you had success in the first one, you might have success in this one also! It might even give them confidence to tell them that your first tenants purchased.
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
6y
If they are good payers, I'd consider seller financing. That would spread the capital gains out. It's really passive and a nice income stream with no worries about property issues. We did it with one rental and would consider it into the future as an exit strategy. Why not just keep the property and let it cash flow? 1031's and starting over with another property seems like a hassle.
Wilkes Barre, PA · Member since 2018 · 3 posts · 9 votes
6y
@John Teachout
Is owner financing a big deal? I own a small 2br SFH with a very good tenant for 2 years. House has increased in value so I'm thinking of selling. Is owner financing a big deal?
Is owner financing a big deal? I own a small 2br SFH with a very good tenant for 2 years. House has increased in value so I'm thinking of selling. Is owner financing a big deal?
Not sure what you mean by "a big deal" but it's not complicated. Essentially the house sells just like any other house, the buyer gets the deed and they have a mortgage that they pay to you on whatever terms are agreed upon. Since the house is "sold" if the roof caves in a month later, not your problem, it's theirs. You're just the "bank". Usually a fairly large (10%) down payment is required since if you have to foreclose it can take a lot of time and money to do so. If someone can get conventional financing it may not be a good deal for them but it may allow someone to get into a house that they wouldn't be able to buy otherwise. The one we sold for $10k down, $107k purchase price and a 20 year mortgage at 7%. I expect they'll finance out of it but getting the $759 every month is pretty nice. It's an installment sale for tax purposes so you pay the capital gains over the whole life of the loan instead of all up front.
Broker · Phoenix, AZ · Member since 2015 · 151 posts · 55 votes
6y
Tenants are always the best buyers! They already know they love living in the home, and you can make the best seller financed/lease option deals as they're very motivated if they like the place and don't want to move. You save the headache of having to prep it for selling, listing it, showings, dealing with tenant move out, etc.. and of course save on all the marketing costs.
The downside is if you later decide or find out you can't sell for some reason and lose a good tenant. But that's a small risk if you've already made up your mind to pull the trigger.
As mentioned before, the more notice you give, the better as well. If your tenants think they'll find something better out there, after they start looking they might think twice and take you up on your offer. I've had several lease options get signed that way.