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Are we crazy?

1,898 Views | 10 Replies | Last: 5 yr ago by Diggity
schwack schwack
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AG
We showed a rent house that we are working on to an older woman the other day. She was referred to us by the realtor that we always use. They have known each other for years. She owns a small house in a nice neighborhood and likes it, but she wants to sell & rent because the upkeep, yard, etc. is too much for her now. We kicked it around after she left and wondered if she'd be interested in us buying her house & her staying where she is. We asked the realtor & she's meeting with her tomorrow to talk about pricing her house and what she really wants to do. I think she might have some "sticker shock" when she starts looking for a nice, comparable rental and so we thought this might be a good option for her & potentially us. The realtor told us her house is well maintained & "super cute" but we haven't seen it.

Let's say the price is good, there are no major repairs to be made and the upkeep is reasonable (big yard & small pool) and we can make a deal. Would we be foolish to come up with a lower than normal rent for her to stay in it? Of course it would have to cover the mortgage (if we take out a loan), taxes & insurance, yard - plus some for maintenance & the hassle factor/profit - but I think those costs would be less than what our rent will be on the house she looked at. We are not a charity and hopefully the price will be right and we could make money on it eventually. We wouldn't guarantee she could live there forever, we'd do a standard 1 year lease & go from there.

We see the upside being that we wouldn't have to do any renovations while she's there or look for a tenant - although it will be an easy rent later based on it's size & location. (However the pool concerns me on a rental so it might be our first flip house.) Having her cover all costs related to the property and stay is a good thing, right? I know we're supposed to be in this for the money and I think it will produce a good profit later but in the meantime, she'd basically be paying if off for us. I'd guess her age to be late 60's or early 70's. Still gets around pretty good, but with a cane.

Once we find out the price we'll have to figure our eventual upgrades/reno costs into the deal, what we can charge for rent if she moves out, etc. to see if it's workable.

On the other hand, she might just want a change and wouldn't be interested. We'll know tomorrow.

Thoughts? Are we missing something obvious?

edit: Husband Schwack just drove by it & says it's pretty great on the outside - depending on price, looks like we're interested if she stays or not, but I think it would be great if she did.
mwp02ag
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AG
Seems like a great opportunity to assume her note or make it a seller finance deal if she's free and clear? I aggree this sounds like a great win/win. Please keep reporting back here to let us know how it's working out!! Exciting, congrats!!
CS78
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Many pros will tell you to never let an existing owner stay in the house as a tenant. Reason being, they will always see the home as theirs and have a hard time respecting the new landlord/tenant relationship. Taking a good look at her personality might help you determine if that would be a problem.
schwack schwack
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AG
If she's even interested in this plan, you're right, we'd have to make things clear from the beginning. I hope to get the realtor's opinion of how she thinks it would go. She's known both of us for years - her for longer.
SteveBott
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AG
If the numbers don't work for you a reverse mortgage might work for her. Assuming she has good equity she could take the proceeds and set up an annuity that pays out enough to cover expenses annually.
schwack schwack
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AG
I don't get the impression that this is about money. I think she just doesn't want to deal with stuff any more. She has a yard guy, pool guy (& she never uses the pool), etc. already but said she wants to let go of all that and just rent somewhere. It will be interesting to see what happens when she talks with our mutual realtor friend tomorrow & where she really stands.

She loved the house we are working on and seemed most excited that we have the lawn done & she doesn't have to hire someone. That's an easy thing to do so she must be really sick of it.
malenurse
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AG
My only comment to the situation is that it violates one of my rental property absolutes.

Never own a rental with a pool.
The last thing I want to do is hurt you. But, it's still on the list.
94chem
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Quote:

Never own a rental with a pool.
schwack schwack
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AG
I know - I've never wanted a pool for myself & the rental thing is concerning. Waiting to hear from the realtor today to see what this lady wants to do. After sleeping on it, it would have to be CHEAP and she'd have to want to stay in it. Then, we'd eventually fix & flip. Priced right we could really make some money on it. If she just wants out, we'd consider it as a flip but probably not a rental.
aggie appraiser
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If she's owned the property for a while, you are likely to get hammered with huge increases in property taxes.
schwack schwack
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AG
True, but it normally takes the CAD here a while to catch up. And if valued more than purchase price, it's pretty easy to appeal within reason.
Diggity
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AG
I would guess that she'll get over the idea of being a renter when she discovers what the true market value of the PITI + maintenance would be on her property. She's probably used to a certain amount per month for these expenses and it would obviously be quite a bit higher when she becomes a tenant.
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