Selling starter home, becoming tenant in home

[Timothy Albright]

Good morning all,

 Looking for feedback on a unconventional way to sell home to gain all equity within the home. The ideal outcome would be to find an investor I could sign a 6-12 month lease after purchase and then become a tenant. 

  My question would be, have any investors here purchased property from seller and seller stayed in home for a short period of time?  Any info would be appreciated. Thanks 

[Nathan Grabau]

Leasebacks and post occupancy agreements are very common. In Colorado, if it is going to exceed 30 days, a lease that is separate from the sale of the property is necessary. 

Some things to think about:

If you want to do this, you are reducing the buyer pool, investors know they are only competing with each other because no one can buy the home with a primary home loan if you are going to live in it for more than 90 days. This will negatively impact your sale price. 

You also have Realtor fees and closing costs if you sell. If you sell straight to an investor they are pretty much going to give you a cash price that reflects these fees. When I underwrite exits, I assume that I am going to pay 7-9%, between: realtor fees, closing costs, concessions, and inspection items, and that is if you price competitively. If you do not price competitively, I would assume you will take a larger haircut. 

I would make sure that you have a plan to redeploy the capital. If you sell, you are losing the foothold that you have on your current property, which is something I would not recommend, but run the numbers and see if it makes sense.