Long-term Tenant May Want To Buy
I will hopefully be closing shortly on my second investment property, which has tenants in place. The tenants have said they want to stay. After chatting with them a bit, I felt there was interest in buying the place.
It was never my intention to sell the property, but I never suspected the tenant was interested in buying, either. After reading the forums on this site I think L/O might be a good possibility here. As the situation currently stands, they are paying a good 10% below the monthly average for rents in the area (currently paying $490/mo versus $550/mo comparable), so I am planning on raising rent as soon as the sale closes. This sounds like the perfect time to bring up L/O with them, since they're going to have an increase anyway.
I've read that others charge an additional 5%. Is this 5% per month over the non-L/O rent? And what kind of up-front money does one ask for?
Thanks in advance!
to enter into a l/o the terms and downpayment is up to you.
You are on the right track! What I would do is a perchase lease option. They give you a cash advance called option consideration money about 8-10%down. Based on the current market value of the homeplus the appreciated amount after ****Must Reach Senior Investor status before posting URL's***hen they pay around a $100.00 over market rent. They can use the option to buy after 1 year or you can make the term read 2 years. You will not pay capital gains if you own it more that 1 year. At the end of the 1-2 years you sell to them for the market price at that time.You will make a profit at the begging in the middle and on the ewnd. In the mean time try to help them qualify with a morgage lender so the purchase can go through. This is a great deal and you should be very happy. Best of luck!
Thanks for the great info! We're trying to close before September 1, as that is when the lease comes up for renewal.