Tenant wants to purchased home, need advice

General Landlording & Rental Properties
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Tenant wants to purchased home, need advice

Joe G.
Rental Property Investor · San Angelo, TX · Member since 2013 · 104 posts · 27 votes

Hello BP,
I would like some advice on a tenant who wants to purchase my home.

I was recently contacted by an RE agent who works for the property management I use to manage by home in Georgia. The agent left a message stating the tenant is interested in purchasing the home and to contact the agent to discuss further.

Background: The home has positive cash flow even with the property manager. Current tenant has been in the home for just over a year and is currently on month to month lease.

I am not interested in selling the home as it is in a good rental area, I have a quality property manager, and the unit has had a low turn-over or at least a very quick turn-over each time a tenant departs.

My hesitation: If I tell the agent I am not interested they may move out/not respect the home as much.

I would appreciate any advice on how to proceed with the above information. Thank you.

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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
13y

I think you're worrying too much about it. The type of people that take care of a property do so because they are good quality people, not because they just think they're going to buy it. So after you say no they'll still take good care of the property.

Also the kind of people looking for a house are going to buy a house; yours or someone else's.

So yes telling them they can't buy yours they will move out because they want to own their own place. Don't look at it as bad, wish them well and be glad that they're moving into a better position in their life.

Setting a ridiculous asking price for them is kind of insulting. If you asked someone to sell you a car would you prefer they say no or just be ridiculous and ask for twice what it's worth? People would rather you just be up front and honest even if it's not what they want to hear necessarily.

I seriously doubt you will have any problems just because you told them you don't want to sell.

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  • Simon W.Business Member
    Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 661 votes
    13y

    You're kinda in a dilemma. I think you know what you want for advice. Just more of a reassurance.

    You can make the asking price super high that way if they still want to continue with the purchase you will make a hefty profit upfront or option it so you get a higher rent income and if they don't end up buying while rent to own, they keep the property nice so no need to worry there.

    Just a quick thought.

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    0Reply
  • Joe G.
    OP
    Rental Property Investor · San Angelo, TX · Member since 2013 · 104 posts · 27 votes
    13y

    Simon W.,
    Thanks for the reply. You nailed it, I am looking for reassurance on not selling the home but really more specific advice on how to let the tenant down easy. Things seem to be going so well and I don't want to proceed with this situation and it need up badly b/c of a poor choice on my part.
    Thanks for the reply Simon.

    Anyone else have advice or have been in this situation before? Any real world examples would be great also.

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    13y

    I think you're worrying too much about it. The type of people that take care of a property do so because they are good quality people, not because they just think they're going to buy it. So after you say no they'll still take good care of the property.

    Also the kind of people looking for a house are going to buy a house; yours or someone else's.

    So yes telling them they can't buy yours they will move out because they want to own their own place. Don't look at it as bad, wish them well and be glad that they're moving into a better position in their life.

    Setting a ridiculous asking price for them is kind of insulting. If you asked someone to sell you a car would you prefer they say no or just be ridiculous and ask for twice what it's worth? People would rather you just be up front and honest even if it's not what they want to hear necessarily.

    I seriously doubt you will have any problems just because you told them you don't want to sell.

    2Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Tell them you'll give them a zillow-like "make me move' purchase price. They might take it, and if that is enough to buy another good property that cash flows, it might be OK. But I think Matt Devincenzo has given you good input; somebody looking to buy is not so likely to do damage; they might hold out hope you'll change your mind soon.

    2Reply
  • Chris Sweeney
    Real Estate Investor · Austin, TX · Member since 2011 · 271 posts · 106 votes
    13y

    It's sort of tough. For all you know they are not qualified to buy a house and just like the idea of it. Perhaps the agent hasn't pre-qualified them at all.

    Like Matt Devincenzo said good tenants don't go off the deep end just because they don't get what they want. Good tenants tend to be responsible people.

    If I were you I would just say that unfortunately at this time it does not work for you but there's a good chance you will be open to it down the road (as you inevitably will be since you will likely sell it some day.) That way, you are not slamming the door shut but they may hit you up in a year or two which would be fine by me as multi year responsible tenants are good news.

    Like Steve Babiak said if there is a reasonable price that lets you step up in property or serves your needs another way maybe put that out there. But, only if you will entertain it as that may get them excited. An inflated price would likely blow up on you in terms of an appraisal contingency or if the tenant does their homework and finds it's a bogus asking price.

    0Reply
  • Troy Fisher
    Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
    13y

    Offer the Tenant A Lease-Option!

    Explain to them that due to your strategy you are not ready yet to sell the property but if they came up with a 10k option payment to buy in 12 months, you can start to re-deploy the capital in another area, while still collecting rent. Some of the L/O people on BP will probably tell you that many L/O don't execute the purchase.

    2Reply
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