Seller Wants Future Rental Profits

[Ben Jamin]

Hi All,

I recently went under contact on my first STR, Yay!

The property is already an STR and the current owners have bookings confirmed into July.

The closing date is set for March 30th (meaning, I will then take over the property that day).

The sellers have asked me to either let their pre-paid guests stay in my property (and they keep the profits)

OR

pay the sellers nearly $6k, in reservation fees that they would have profited if they were not selling the property.

Is this common?

Any thoughts on how I should respond?

[Joe Splitrock]

Quote from @Ben Jamin:

Hi All,

I recently went under contact on my first STR, Yay!

The property is already an STR and the current owners have bookings confirmed into July.

The closing date is set for March 30th (meaning, I will then take over the property that day).

The sellers have asked me to either let their pre-paid guests stay in my property (and they keep the profits)

OR

pay the sellers nearly $6k, in reservation fees that they would have profited if they were not selling the property.

Is this common?

Any thoughts on how I should respond?

 That is not normally how it works. The sales price would include any consideration like this. The new owner gets any prepaid rents transferred to them. If nothing was negotiated in the contract, then you are under no obligation to give them anything. 

That being said, they are under no obligation to transfer future reservations to you, unless the contract says they would. So in that case, there could be room for you both to negotiate. I would probably tell them that future reservations are not guaranteed. Guests can cancel. Pandemic, war, natural disaster, who knows what can change things. That future rent is not theirs or yours until you fulfill the reservation. I would also tell them you have operational costs so that $6000 is not profit. Your expenses will be higher than theirs most likely due to payment being higher. I would offer some additional fee to transfer reservations, like a 10% booking fee. This is to compensate them for their time lining up the bookings. 

What does your realtor have to say about it?