Tenant Wants To Buy The Place

[leapy]

Hey there,

I've had an expression of interest from a tenant in buying the property they rent from me. Is there anything I need to be aware of in proceeding to look at this proposition? The property in question has been owned 8 years by me. I've never sold, always held, and it feels unnatural to be considering it!

[xris]

Having a keen buyer approach you first sounds like a good position to be in. The fact that they are tenants in the property may also help minimise potential loss if you were selling to another buyer. It all depends if you want to sell though.

xris

[drelly]

Why are you considering selling now?

[leapy]

I guess my mind is just meandering over options for using the cash it would free up. I'd probably pay down some more on my PPOR, buy another two IPs - and maybe get around to that wedding.

[MikeO]

Hi - sounds like a bad idea to me. Suggest you think about 2 thngs:
1. do I really want to sell? and
2. If I do then is this the best way to sell?

I'd be particularly worried that you might not get the best price. I would always pay a good real estate agent to market a property properly rather than sell privately (I'm not a real estate agent in case you are wondering!!!!)

[Aston]

Hi,

My advice is don't sell.

I was in a similar position several years ago. One night a person called me, out of the blue, and made me an offer on a property I really hadn't considered selling. He made me a good offer and I thought about it for a time and to cut a long story short I sold it. The only reason I sold was because in the meantime I had dreamt up other things to do with the capital.

It wasn't part of my overall plan to sell the place and I regret selling it mainly for that reason. Had I kept the place I would be a lot closer to my original long term goals than I am at the present time.

If it's not part of your plan....... DON'T SELL.


Aston

[whitt]

Have you thought about Lease optioning it?
They continue to rent with an option to buy at an agreed price during the term specified.

[McDuck]

If they have developed a special attachment to the place because some of their children have grown up there…
And you just consider it as an income source …in other words, any other rental will do.

Then tell them that you are “not opposed to selling”,
as long as they can find an equal investment property for you , and that they will cover all your costs in the transferal procedures.

Failing that, let them know how long your hold strategy is…and offer them right of first offer, at your sell date.

[roseneath_rat]

Whitt that would be a useful alternative if the tenant where not in a position to complete the purchase right now. In approaching the landlord I think they are demonstrating the ability to do so now, assuming they have been realistic in their assessment of the property value.

You can see the thought process... "we've saved up some cash, we're tired of paying someone elses's mortgage, lets buy. Hey we like it here why don't we buy this one?"

If you don't decide to sell get ready to find some new tenants.

[Chemill]

Here's the situation:
Keen buyer & not so fussed seller.

I say sell it, but sell it at your price. Make the price at the level where you would be interested in selling (i.e a lot higher than fair market value). If the price isn't high enough, don't sell & find some tenants.

possible strategy: Get the house valued and add 30% (or more?).

If you are going to sell, make it worth your while.

I disagree about using a Real estate agent - you've already found a buyer.

Chemill

p.s Negotiating tip: First ask them what they would be willing to pay for the house - see http://www.bizoprefund.com/public/department6.cfm

[JohnL]

Being a private sale, the purchaser's bank will more than likely request a valuation and only lend to that, not the S&P price, so selling it well above value may not work for the purchaser.

If its through an agent, then the bank lends to the S&P in most cases and don't usually ask for a valuation.

This is one reason why private sales sometimes go a stray, particularly if the valuer is conservative as well. If the purchaser has a large deposit or all cash, then its less of a problem.


John