Selling your property to the tenant may seem like the most rational thing to do, but there are some pros and cons to consider before making a decision.
The issue of cost
As the owner and landlord of a property, you’d likely think your tenant would pay the highest possible price for the property, especially if they want to guarantee the sale. However, with their emotional attachment may come a sense of entitlement.
They may have taken on some of the fixing and maintenance of the house, whether with your permission or not. If they have lived in the property for many years, they’ve likely also made personal changes, which they believe should reduce the overall price (especially as they’ve done more work on it than needed).
However, their improvements may have actually devalued the property, and you’ll also need to consider general wear and tear in your final figure.
How wear and tear impacts a sale
If the tenant were to move out, you’d likely need to restore the property to its original condition. This is not to say that they’ve damaged anything, but wear happens naturally over time. Whether the house needs a new carpet, or a fresh lick of paint, making these changes could help you get more for the house by selling it on the market as opposed to your tenant.
On the other hand, as your tenant knows the property so well and has lived in it for some time, they may look over the imperfections and wear and tear, accepting it in its current condition.
Working with a property manager
Your tenants may offer to buy the house, or you may simply be interested in selling it. Regardless of the reason, it may be worth getting a property manager involved if you have one. If you have a good relationship with your tenants, then it’s fine to approach them directly. However, you may still want to be a smart negotiator and not go below market price.
Keep in mind that even if you have an existing property manager, you’re not obligated to sell with them.
The pros and cons of selling to a tenant
The biggest con is obviously that by selling to your tenant, you may miss out on the highest possible price for your property. This may not be a priority for you, but it’s an important note to consider.
Selling to a tenant
When you sell to a tenant, the entire process is faster overall. There’s no need for a signpost outside, nor a drawn out viewing process. You’ll also likely save on estate agent fees and the whole process can be very transparent, especially if you have a good working relationship with your tenants. That being said, dealing with a property manager can be challenging, and tenants could feel a sense of ownership of the property from the get-go.
Selling to the market and tenants
When you’re selling to the market and your tenants, you may get a better price on your property, as the tenant will be competing with other buyers. They may also feel a sense of urgency to buy, which comes with its own benefits.
Additionally, the real estate agent you work with will handle any issues and communications during the sale, and the tenants will have to contact them for information, not you. However, the process will probably be more drawn out, you’ll have to pay realtor commissions, and you may have to pay your agent to get the marketing on your property right.
Find a size that fits
Selling your house to a tenant is not a one-size-fits-all process and may involve more consideration than you initially thought. That being said, it can come with a lot of benefits.
If you’re unsure about anything related to the home loan on your property, get in touch with an expert broker to help you work through the process.