Tenants want to buy the house...thoughts?

Question

I have great tenants who have asked twice if I would be interested in selling the house they currently rent from me to them. I bought the property a year ago and numbers wise it would not make sense to sell. They asked if I'd be interested in a rent to purchase deal. Wanted to get your thoughts how this can become a beneficial deal for me, if at all. Thanks!

Sean Phillips · Answer

Just my 2 cents here......... You also need to be looking at their motivation.  With the market the way it is they probably cant get a conventional mortgage.  Ask them as they maybe looking to move out to something else.  Not that that really matters just that you should be ready for them to bail.  I would also take the advice @Jd Martin gave regarding your asking price.  Again remember your business plan.  What was your plan to get out of the house before you bought it?  If you have only had it for a year there is no equity in the property unless it has appreciated in that time frame.  If I were you I would say sorry not looking to sell and prepare to rent when the lease expires.  IF THEY LEAVE.

Arpita McGrath · Answer

Thank you for taking the time with your feedback, greatly appreciated!!

Mindy Jensen · Answer

@Arpita Patel, just because they want to buy doesn't mean you have to sell. If you want to hold on to the property, tell them no.

JD Martin · Answer

Think up your dream price and give it to them. Otherwise, do what's best for your own financial situation. I have had tenants ask me this before, and the answer is essentially always no because there's more profit holding the property. Figure it this way: I make a minimum of 12% return on my cash on every property. Unless the tenants are going to pay me similar interest, or I really wanted access to equity for some other purpose, what is the value proposition for me to make less interest?

Mike Flatow · Answer

I'm not big on rent to own but the seller usually has the advantage.  I'd say a biggie is that will be no realtor involved so if it ever did make sense for you to sell you can save on the commission. You can also ask for a non-refundable option to buy deposit.  I'd also assume that they would tend to remain great tenants if they held a rent to own option and it would be harder for them to walk away if they were earning equity in the property so you could count on the cash. Another thing is that you remain the owner of the property until the actual sale. If you are getting tax benefits from the property, they will remain.  It's such an interesting concept. It seems that if you were hot to sell it would be perfect for you but I understand the quandry.