Are your tenants buying houses too?

Question

Too many of our tenants are buying and even building houses; this is an expensive market! I'm happy for them and they are not hard to replace; but still!

You guys and gals experiencing the same?

Joe Splitrock · Answer

I have had a couple buy houses, but that is pretty typical for me. Despite the media claiming everyone has hardship, most of the country has more cash reserves than ever. Look at the latest round of stimulus. A family of four making under $150K household income will get $5600. In my city, with first time home buyer programs, that is enough cash to buy a house.

Mary M. · Answer

well, just to play devils advocate - There are many  LLs that are not paying their mortgages just because they can - they use that money to save and fix up or buy new properties.....   So why would it be wrong for tenants do same? (I dont support folks using the Covid laws unless they have lost income, just pointing out the similarity)ETA: rental tenants usually are younger families so it makes sense they are wanting to buy and move up the economic/adult ladder...  and yes buying is one of the main reasons my tenants move)

Steve K. · Answer

@Bjorn Ahlblad I like it when my tenants buy homes for themselves. Besides the feel-good factor of seeing them go from renters to homeowners, I have a clause in my lease that says they can break the lease anytime to buy a home, providing they use me as their buyer’s agent. Win-win!

Nathan Gesner · Answer

In both cases, the payments are simply delayed. The difference? If a Landlord fails to make payments and then walks away, the mortgage lender will take possession of the home and they'll lose all equity and their credit rating. If a tenant walks away, they don't lose anything and there is a very good chance they won't even be reported to the credit reporting agencies because it's so difficult for a mom-and-pop Landlord to do that. I estimate less than 20% of delinquent renters will be chased after or reported to the credit reporting agencies.

Bjorn Ahlblad · Answer

@Nathan G. Imagine a scenario where someone has not paid rent for a year and that makes up half of their down payment; they leave you high and dry. The LL wouldn't even know what's up-just happy a bad tenant is leaving! Far fetched-maybe; diabolical and entirely doable given today's political climate.

Steve Vaughan · Answer

I've been doing the same, just verbally.  I would prefer a tenant with a goal of homeownership. Would like to sell you this one down the line when you're ready.

I am being truthful and have had tenants that take care of the house.

Nathan Gesner · Answer

I've seen an increase in Tenants becoming home buyers, but it still hasn't impacted our rental market, which is very competitive. There are too many people moving to our area and we're experiencing a serious shortage in homes to buy and rent.

Dan M. · Answer

I think my particular market is too hot right now for buying to be an option I have had noone leave to purchase. Why don't you sell them your rentals or see if they want to do a rent to own scenario?

Shiloh Lundahl · Answer

@Steve Vaughan @Mary M. I defer the majority of the maintenance to my tenants all the time when I set up the lease with the option to buy program with them. It is written into the agreements that they will be taking care of the fixes to the property. However, anything major (usually a cost of $1000 or more) that is necessary such as a AC unit going out, etc. we will take care of the cost but then we add the repair/replacement costs to the option price. So we recoup that money eventually if the tenant buyer exercises the option. It can really be a win-win program.

We have had 4 people exercise their option within the last 6 months. All of them walked into tens of thousands of dollars of equity. They weren’t complaining about repair costs.

Mary M. · Answer

@Nathan G. that is not even relevant? I am merely pointing out there is a double standard.   LLs should not be not paying their mortgage just cause they can, just like tenants should not not pay their rent just cause they can....

both are taking advantage of a pandemic to self serve while hurting others - ie the person expecting that income each month.

Are your tenants buying houses too?

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