I have found a duplex for sale that was purchased from a bank in Oct of 2013 (I saw the listing when it was for sale thru the bank, but was not in a position to buy so I didn't look at the property), the current owners did some rehabs (according to the listing), renovated the top floor and live there and have done MOST of the work in the bottom unit. Obviously the current owners are not paying rent, am I right in thinking there are multiple steps to take in making an offer? Obviously an offer would need to be accepted, but if they are wanting to stay they would also have to agree to rental terms and rate and such right? Would all of that need to be submitted at one time, an offer and a rental agreement. I wouldn't want to run a background check and such on a property I don't own, or would it be similar to inheriting a tenant even though they are not paying and assume they are a month to month lease and try to get into a 12 month agreement?
Do you know that the current owners definitely want to stay? The first thing that you mention makes me a bit cautious, if they live there and like it enough to stay, why would they already be looking to sell it? Did they find something they didn't like and want to pass off the costs/issues to someone else?
What you are talking about is referred to as a sale-leaseback in the commercial world, where the current owner also occupies the unit and wants to sell the property to take cash off the table but still stay on as a tenant.
If the owner does want to stay then you would just treat it as two different steps. The normal purchase contract, and then a new lease as if they were a new tenant. It is their property now so there is no month to month lease that you have to assume. You would start a new lease agreement with them.
It would not make sense to do this sort of transaction if they want to sell the property to you and also pay you less than market rents. If they want to pay you $600/month when you could get $800/month from a new tenant, then maybe it isn't such a great deal. But again, the first thing I want to know is the REAL reason why they are selling if they like the property enough to sell. If they like it enough to still live there and just want to get their cash out, why wouldn't they be doing a cash-out refi and getting a longer term conventional loan on the property as an owner-occupied property?
Just got an email back from the realtor, they are wanting to move back closer to her mother. It is in an area I know and already have one property in so it seems to be priced right and a good fit, I guess I need to go do a walkthrough and see how much more work is needed on the bottom unit.
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