How would a landlord respond to an offer to purchase from a tenant?

Question

I'm currently 18 months (1 year lease, 6 months on month-to-month) into a SF lease. I've never missed/been late on a payment and we've taken very good care of the property as it were my own (probably better than any tenant before hand as well). I've been wholesaling but I'm now interested in purchasing a property of my own as a landlord. I've considered purchasing a multifamily to live in and rent out the other unit(s), but that won't work for my young, growing family.

I've recently considered reaching out to my current long distance landlords to make an offer to purchase the property I currently lease. They've made comments leading me to believe they have been upset with the current property management company and seems like they would fit the mold of a potentially motivated seller. The property is in a fantastic area where rents are typically $1000-$1200/month for a typical 3/2. ARV's for this property are around $135k-$160k. There's some deferred maintenance on the property as well. If purchased, I'd hold it for a 6-9 months until we're able to find another house that's larger for my family to live in, then add this property as the first to my portfolio.

My question is, as a landlord/investor, what would be the general thoughts when receiving an offer to purchase a property from your tenant? Any insight would be welcomed. Thanks.

Mark Tamondong · Answer

If I were a landlord, I would definitely re-assess the tenants history, as a tenant. Review the offer and would also review the investment I currently have on the property. Then from there forward, I would be able to conclude whether I will show motivation to the tenant or not.

Regards,

Mark

Regards,

Mark

Adam Roberts · Answer

I agree - if they acquired via inheritance you may be dealing with someone that has some motivation. Give them a 30 day notice to move-out and they'll have even more motivation.

Darrell Shepherd · Answer

Sounds like opportunity to me, even to get good financing terms. There is no rule of thumb, you just gotta call them up and let them know you are going to buy something soon (so they know their great tenant is leaving) and ask if they'd be interested in selling?

If its inherited rental property and they are out of state and dont like dealing with the management company, you're probably going to get someone easy to work with.

Ivan Jenkins · Answer

@Adam Roberts Thank you for the response. The deferred maintenance to the property includes, but is not limited to, roof damage/leaks/roof replacement ($4.5k), deck repair ($1.5k, gutter replacement ($1k), landscaping & tree work ($1k), carpet replacement ($500), and kitchen/bathroom repairs/upgrades ($3.5k). I've budgeted for between $12k-$15k in deferred maintenance issues to address over time following a purchase.

The current landlords do not appear to be the quintessential buy and hold RE investor, as it seems this property was rental that was acquired via an inheritance. That being said, I do not know if an offer from me would meet their exit strategy, assuming one exists.

Adam Roberts · Answer

@Ivan Jenkins I would probably handle an offer to purchase from a tenant the same as any other offer...It would need to work within my financial exit strategy. They most likely have an idea of what they will sell for, and what their general exit strategy is.

How much deferred maintenance are we talking?

How would a landlord respond to an offer to purchase from a tenant?

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