Looking to buy but stuck in a lease

[Leah Bates]

Hi! Looking for advice - 

We are in a lease through the end of May 2022 but really want to get started on our REÍ journey. We plan to purchase a duplex and owner occupy for a year in hopes of buying a SFH afterward and renting out both sides of the duplex + acquiring additional cash flowing properties.

I have an agent, have been analyzing deals and really want to get the ball rolling. However, I realize if we close it will be around winter and we may have vacancy throughout winter.

would it be best to wait and ride out our lease or at least get closer to the end of May to avoid too much overlap or should we try to get out of our lease and buy now before rates are back up to 4-5% (which I’m realizing makes it tough to cash flow)

also, how do you handle this situation as a landlord? What do you write in your leases (in WI) regarding someone breaking the lease?

Thanks!!!!!

[David Mo]

Hi @Leah Bates! Units tend to rent for less when you're looking to start in the winter (no one wants to move when they could be inside sipping hot cocoa instead!) A way to circumvent that is to look for a property where 1/both units are already rented. The danger of doing this though is that you don't know how the tenant was screened which presents extra risk. I like to ask for rent rolls and to see for how long the tenants have been in the property for. It also helps to pay attention to each unit and talk with each tenant during the home inspection. From a landlord's perspective, there's most likely a clause stating something along the lines of "you must notify PM 60 days in advance if you plan to break the lease" so I would start that discussion with your landlord now. 

Here's how I would think about it: 

How much roughly do you think it's going to cost you to end your lease early? This includes potentially renting a place out in Winter or worst case having a vacant property for 2 months. How soon are you going to recoup that cost by the potential lower interest rate you're going to get? 

Personally I think if you're planning to hold this thing for 10+ years and you guys are not financially strapped to where this decision greatly affects you, lock in a great rate today and you won't even think about it 3 years from now. Hope this helped a bit!