There is always a little trepidation involved in renting out a property. Landlords must face the risk of signing a bad tenant that won’t pay or who damages the property. That being said, there are plenty of investors who secure excellent tenants.
A Good Tenant Might Be Your Buyer Too
Should the time come when you are ready to sell your investment property, a good tenant might be your buyer too.
The appeal of selling your property to a tenant is the ease of processes compared to a standard property sale. When selling to a tenant, you won’t need to worry about dealing with real estate agents, commission negotiations, marketing costs as well the hassle of open homes.
There are however some downsides too. The ease of selling to a tenant might make you overlook the real profit potential of that property should you give your tenants first choice. Many tenants may expect a discount knowing that they will be saving you from some of the many costs involved in listing your property for sale.
The Benefits of Selling to a Tenant
The opportunity to avoid uprooting and finding a new place can be incredibly appealing to a tenant. It may give you stronger leverage with it comes to negotiating a price. Owning the property that they already occupy saves them time, hassle and money too! Their emotional attachment towards your property can also be a strong negotiator in your favour.
If you are looking for a smart way to save on listing your property for sale, selling to a tenant is one of the best methods. A current tenant will see past the wear and tear that has occurred during their occupancy and accept the property in its current state, which could save you big on updating and repair costs.
Another big benefit to selling to your tenant is that you get to negotiate with them directly avoiding the cost and hassle of a second party agent. You most likely already have a prior relationship with the tenant and can use this to your advantage in the sale negotiations.
The Risks of Selling to a Tenant
Though beneficial in many ways, selling to a tenant can also be problematic. The biggest risk is that you may be losing out on a better deal. You need to do your research to know if your property is in a hotspot or tight market, because if it is you have a good chance of getting a better offer by listing it to the public.
Your tenant will be using your existing relationship to negotiate the best price for them as well as their extensive knowledge of the property. If they are trying to negotiate the price down based on repairs or updates needed to the property, you need to do your own research and determine if it is better to spend the money to fix things and list the property for sale or sell to the tenant for the negotiated price.
Ultimately, the decision to sell to your tenant or now depends heavily on your and the property in question’s circumstances. Keep in mind, you will still need to hire a lawyer to facilitate the transaction and draw up the contract of sale, so make sure to add this to your costs. Most importantly, you still need to do a great deal of research on the local property values in order to know what your property is really worth.