Bad credit tenant wants to buy

[M Marie M.]

I am going to sell my Florida rental this year. 

My tenant wants to buy it. Great, except their credit is horrid. Like maybe a 530 FICO score horrid.

Ever since switching from having my mother demand rent to automating it with Cozy.co 2-3 years ago, rent collection has not been a problem. Since then their credit is good with me. So, I said I would look into options for them to purchase. Okay, so this is me looking into options.

If I understood owner financing better I would do that. But I don't. The house is worth about $50K, as is, so I'm not sure if it would even qualify for a mortgage.

So what would you suggest?

[Marelyn Valdes]

I sold 2 rentals and held the mortgages in Florida - what an absolute nightmare!  Florida is a debtor state, and if your tenants are buying to live there as homeowners, you will play hell getting them out if they default.  One of mine, I did cash for keys (after losing about 3 month's payments) and not only was it trashed, there were 22 TV's (not flat screen), a pile of tires, and a little over 19 tons of trash and garbage (2 roll off dumpster's full).  He also came back after closing and broke every bit of plumbing by hitting or stomping on it and left his dog and cat locked inside with no food or water.  On the other one, both worked and were fine for about a year, then he got hit with back child support and she got drunk in public and arrested so they fell behind in payments.  I started foreclosure and right before it was going to a hearing she hired an attorney, which took about a year to finally get them out (she was in an accident and getting a large settlement, so I agreed to another 3 free months and to release her from any liability).  They didn't do a lot of damage other than cutting up any screens and left some furniture, but I still had to lose a year's income, pay all the taxes (2 years), and pay an attorney and paint the entire house and replace screens, etc.  I learned my lesson and will never hold paper again.  If your tenants want to buy, let them find private financing (there are people who will loan them the purchase price at a higher interest rate since their credit is awful - I have heard it's running around 10- 12%).  

The other option (I haven't tried it, but know a few who have), is to rent with an option to purchase where the seller gets 10% for an option to purchase at a set price and you rent to them for 1 - 2 years, where they have the option to get financing elsewhere or move.  They are responsible for any repairs during that time.  If they are late, you just evict them instead of the time and expense of a foreclosure.