Ask tenant if they are interested in purchasing mid-lease?

[Christine Mwai]

Ok. I'd appreciate any input on this... On a specific rental..love it, cash flowing, great young couple that are my two year tenants. I am however tight for money and would like to take my equity out to move on to other investment opportunities... I am not able to use conventional funding. This is a free and clear property. What are your thoughts on asking them if they would like to purchase?.. they have 8 more months on this lease. Don't want to spook them coz I have another one same scenario.. I know it may sound silly, but I'd appreciate ideas on this .

[Bill Devola]

Its hard to give concrete tips without knowing a little more about the situation, but I've presented numerous times in similar type scenarios, and here are some of the things I've learned:

• know the numbers ahead of time, but don't throw numbers at them unless they ask (some people need to sit with big concepts before delving into math. They'll let you know if/when they want to talk numbers). It sounds obvious, but a big part of their decision will be how current rent stacks up to their potential PITI (principal insurance taxes interest). If the PITI is lower or equal to rent, play that up! If its alot more, have a few reasons why it still makes sense for them (doesn't need much maint, values appreciating in area, etc. Whatever applies)
• Don't inflate the price thinking they don't know the market!  Not implying you had that in mind, but just a lesson I've learned the hard way.  When it comes time to make a buy of that size, everyone turns into an expert or has close family/friend that is an expert values.
• If you're hesitant to ask for some reason that's not clear above, you should wrap it as a courtesy to them.  "You know, this place has been great as a rental for me b/c you've been great tenants.  I'm thinking of selling, but then I thought to myself 'why not offer it to you guys first?'  You've been here for x number of years, seem to like it blah blah blah"

One other thing I've learned is you'll most likely have to set a deadline.  90% of the time you don't get a yes/no answer like you'd hope.  You get hemming and hawing for weeks.  I can't give any advice here because you have to play the situation by ear and use your gut.  But one of the first rules of persuasion is having a limited opportunity.  When people think the opportunity is chasing them or is ever present, you won't end up with action on their part.