Renting a property is always hectic. Homeowners run the risk of signing bad tenants who do not pay or damage the home and generally cause a nuisance.
However, for every bad egg, there are many investors who hire a good tenant – the one you would like to stay for a long time. With confidence, these tenants trust your property because you know they will take care of it. these are the ones you want to sign long-term contracts.
If the day comes when you want to sell your investment property, a good tenant may well become your buyer as well.
Selling a house to a tenant is attractive because it offers the promise of being a less complicated process than selling a standard property. You do not have to worry about dealing with real estate agents, negotiating commissions, approving marketing campaigns and staying in touch with potential buyers.
Nevertheless, it has its disadvantages because you could lose the real profit potential of your property if you grant your file to your tenant. You can also expect that you give them a discount, especially if you do not pay a commission to a real estate agent.
Why sell to a tenant?
When you sell your property to a tenant, you sell to a buyer who has already lived in the house. They have made it their sanctuary for a reasonable period of time, and the opportunity to avoid uprooting and finding a new place to stay can have incredible appeal.
This could give you more weight to negotiate the asking price, as the opportunity to own their existing home could spoil all the other opportunities available to your renter given the time, inconvenience and cost savings that can be expected. they would not have to start. more than. The feeling could also be your best friend in this situation.
"Your tenant may be truly emotionally attached to the house and may be willing to pay a good price for your property," says Michael Yardney, CEO of Metropole Property Strategists.
In addition, selling to a tenant is a clever way to save you the time and money you would need to spend on building a property for sale on the open market.
"As your tenants live on the property and know it well, they may see beyond the wear imperfections that have occurred over the years and accept it in its current state," Yardney adds.
Another potential additional savings is to avoid the payment of agent commissions because you can negotiate directly with your prospective buyer.
"Having a previous relationship with the renter / buyer can help you make a quick and painless sale," said James Nihill, managing director of Patrick Leo.
"As a salesperson, it is important to have a good relationship with the tenant, as this can facilitate the process as a whole. I encourage to speak with the renter personally and to try to reach an agreement. While the benefits of having an agent include the possibility that your home is selling at a higher price, the commission you pay goes against that and more.
You will still need other parties to facilitate the transaction and establish the contract, so that a lawyer will have to be part of your team.
You will also need to do a lot of research on local property values ​​to know the true value of your property.
Risks associated with selling to a tenant
Although this type of transaction may be advantageous in many ways, it can also be tricky. For example, you could close the door to a better deal.
"Of course, you'll save as commissioners for advertising and real estate. But you lose all competition from other interested buyers, which could be worth a lot more for you, "says Yardney.
"Currently, with fewer investors in the market to buy properties and the fact that homeowners buy properties with their heart rather than with their calculator, it usually means that you will get a price higher by selling your vacant property in the open air. market with the maximum number of potential buyers looking at your property – buyers and investors. "
If your property is located in a hotspot or a restricted market, you will definitely want to consider including it in the market for sale to the public, so that you have the chance to get the best deals.
Do not forget that it is likely that your tenant will attempt to negotiate with you based on your current relationship and his knowledge of the ins and outs of the property.
"They've lived in the property for many years and have made personal changes to it, they're starting to think that you should reduce your price for what they've done to the property," he says. Yardney says.
"Some of these" improvements "may have actually devalued your property, but they still expect a discount."
In cases where the condition of the property might be causing you problem, it might be wiser to assess the situation and spend the money to improve your things. As a result, you can even add a greater value to your property for outside buyers.
The decision to sell a property to a tenant ultimately depends on your priorities and your situation. The important thing is to keep in mind the real value of your property. You can avoid some of the stress and time you invest in a sales campaign by taking this shortcut, but at what financial cost?
