Andover, MA · Member since 2015 · 103 posts · 13 votes
We are making an offer on a single house near UMass Lowell as an investment property. (3 bedrooms,1 bath. 5 minutes walk to the university). However, the seller accept the offer but asking to rent back until they find a place. However, this condition was not listed on the listing...Hope to receive advices as what to do?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
@Vy Mai what can happen in a leaseback is the seller puts x months of rent in escrow from the sale so you're not tracking them down to receive rent or having to 'qualify' them.
If they are expecting it to take 2 months to find a place, ask for 3x rent (or whatever you think) to be withheld in escrow from their sale proceeds.
Chicago, IL · Member since 2015 · 298 posts · 261 votes
10y
Based on what i have seen and heard, this is rarely ever a good idea and should be avoided if possible. If you go ahead with it there is a lot that has to be taken into consideration such as insurance and type of financing.
We are making an offer on a single house near UMass Lowell as an investment property. (3 bedrooms,1 bath. 5 minutes walk to the university). However, the seller accept the offer but asking to rent back until they find a place. However, this condition was not listed on the listing...Hope to receive advices as what to do?
They don't have to offer a leaseback option in the listing. It's something to be negotiated. If neither is willing to budge, walk away.
Investor · Dyersburg, TN · Member since 2015 · 320 posts · 100 votes
10y
I personally would do this, and have done it in the past as well as done it myself. They are going to pay because a negative rating would hurt them in the buying process again or in the renting process. Its a safe investment. Figure out mortgage, INS, Taxes, etc and rent it to them with that plus whatever profit you are wanting to make.
Andover, MA · Member since 2015 · 103 posts · 13 votes
10y
Thanks everyone for your helpful advice! We decided to rent it to the seller! Basically it will break even as we realized that it's good to have instant renter! Maybe we'll increase the rent to the next renter a little bit once we know the market more
Entrepreneur and Linguist · Braddock, PA · Member since 2015 · 70 posts · 40 votes
10y
Now is the time to plan any rehab you might want to do between renters while the building is still occupied. You can start stockpiling renovation materials by shopping around and getting the best price. Start checking on references to contractors if you don't already have them in your rolodex. And once you have notice that the tenant is ready to move out, start advertising the vacancy heavily at UMass Lowell with a move-in time calculated from when you'll finish the rehab.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
@Vy Mai what can happen in a leaseback is the seller puts x months of rent in escrow from the sale so you're not tracking them down to receive rent or having to 'qualify' them.
If they are expecting it to take 2 months to find a place, ask for 3x rent (or whatever you think) to be withheld in escrow from their sale proceeds.
Andover, MA · Member since 2015 · 103 posts · 13 votes
10y
@Steve Vaughan that's a good idea! However, my seller/future tenant plan to stay there up to 6 months so they can find another house. Is that money too much to ask for?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
I don't think 6 months is too much to ask for as long as they have the proceeds from the sale @Vy Mai. If they stay for less, they will get it back from the title co. You could agree on partial payments, bi-monthly, however it works best for you and the seller.
I would make sure the rent you are charging them covers your mortgage, property tax, Ins etc and still leaves you a profit. I would offer them a thirty day lease tenant at will.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
This is a common RE practice and only needs a fixed term, non-renewable lease.
We bought at a great price and the seller had major items to be moved out of state during the YE holidays. Of course we allowed the rent back - - to be above board, we let them stay rent free to the YE, and they were out by Dec 15.
Andover, MA · Member since 2015 · 103 posts · 13 votes
10y
We are nervous first time being a landlord... not sure if we should use lease agreement from ezlandlordforms.com or should we hire the attorney to draft up one for $500....any inputs?
Attorney · Attleboro, MA · Member since 2015 · 412 posts · 165 votes
10y
Are you using a Realtor to purchase the house? There are several standard leases out there and the realtor may have one. There used to be a place in Boston that sold them and other real estate forms (can't remember the name of the place at the moment). Are you using an attorney to do the closing? Can he help you at a discount rate with a lease? If he does real estate law he may have a standard one you can use.
Although you said this is your first investment property, treat this as any other landlord tenant situation. If you are going to charge first/ last/ security you must follow the law! If you don't know what it is find out! You will need it later when you rent on the open market.
Even though you are renting back to the seller you will want to know who exactly is there, any pets, are they going to keep paying electricity, water, snow removal etc
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
10y
@Vy Mai I would run a complete Tenant check on EVERY renter including iPhone pic of their licenses.
Make sure you have a complete set of necessary docs: Application, Lease (TAW), Statement of Conditions, Escrow and blue Lead Disclosure. Should be available from your Buyer Broker. also Video/pictures of the rental.
I'd want to speak to whoever did a PreQual/PreApproval for this Seller/Renter and speak to the Broker that's showing them potential purchase listings.
Andover, MA · Member since 2015 · 103 posts · 13 votes
10y
@Douglas Snook yes we are using a realtor to purchase the house. The attorney is charging a flat rate of $500.
@Mike Hurney The seller has been living there for more than 10 yrs. Do you think I should still do background check on them? I feel like 6 months is perfect because by then it would be June, the time when I can easily find renter right? Wonder why you think 6 months is too long?
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
Usually an interim lease is used thru closing for a short period of time a couple of days to maybe a month Six months is a long time and you are essentially acquiring your first tenant .I would do a quick background check and hold a security deposit and would charge close to market rent. peoples lives can change quickly and you want to protect your new property