My Renter Wants to Buy It...

[Pat Burch]

Hey Everyone,

I own 5 investment properties. One house was paid off last year. What a great feeling, $900 a month income with no mortgage, pure joy. Well, the renter has inherited a large sum of money and wants to buy the house from me. He has verbally agreed to pay market price ($94k) as soon as the inheritance funds clear. I bought the house for $62k in 1999.

I spoke with my banker today, he said I should have no problem financing 2-3 additional properties, that I would want to replace the $900 per month loss. My thought is to find 2 properties with a $500+ positive cash flow, in the $85k price range times 20% down = $34k, leaving $60k in savings.

I have never sold a house before. Is there any advice on FSBO in my position? What do you think of my plan?

[Ryan Thomas]

Pat - Since you are selling the property to your tenant, I would think the buyer/tenent would be flexible with the closing date on the sale. Therefore, if you plan on doing a 1031 exchange, there is a good chance you could have your replacement property(ies) under contract before selling you property. This way, you do not have to deal with the stress of the 45 day identification period, and 180 days to close on your replacement properties.

You could also make your sale contingent on the purchase and close the sale in the morning and the purchase in the afternoon of the same day. Just be sure to have the exchange in place before the sale and purchase occur.