Tenants Wanting To Buy Your Rental Property?

Question

Howdy BP Community,

Have any of y'all had experience with tenants wanting to buy your property?  Or have you heard about this happening?  I'm wondering how prevalent this is.

Best regards,

Kevin

Joe Funari · Answer

@Kevin Hoodwin Its rare but has happened. My brokerage is a PM and we do get on occasion where tenants do reach out and request to purchase the property. I have represented the landlord in such transactions and very good at navigating the nuances of tenant requesting to acquire the property. This is especially the case when the landlord wants to sell the property. Per Texas law the tenant has to be given first right of refusal to purchase if the landlord is intending to sell the property. Something many inexperienced investors overlook. Again, I have a lot of experience with this too. In fact, a PM owner approached me about this with a property of his here in the DFW area recently. I ran the sold comps for the landlord and gave recommendations as to what to present to the tenants as a fair market value purchase price for the first right of refusal. Once the landlord agreed on an acceptable sell price I present it to the tenants. If they agree to the price then I have both parties sign an intermediary agreement and prepare the offer docs accordingly and work with both parties on a smooth closing. I also ensure the get pre-approved with a lender before proceeding too. I haven't yet seen a tenant in this scenario pay cash for the property. But I I have worked these scenarios many times. But with the strong market it is right now the tenants didn't agree to the purchase price the landlord wanted to go with on the first right of refusal. Thus, as a result the tenant was given notice to vacate at the end of their lease per landlords request. I will list it for sale in MLS once the move out inspections have been performed by the PM and make ready(if any) is completed. In your case though you wouldn't give a notice to vacate. If your current tenants don't agree to purchase at the price your comfortable with then no big deal. You keep cash flowing that rental property per the terms of the tenants current lease. But you can't win unless you play. But if you decide not to proceed with the sale be sure to let the tenant know ASAP. But doesn't hurt to get sold comps first before committing to anything with the tenant either. Hope this helps.

Bjorn Ahlblad · Answer

@Kevin Hoodwin I think this can work well given the right circumstances. I have had tenants make offers but it is not for me. I don't like selling my properties-at least not yet.