Tenant has offered rent to buy

[Paul j F]

Our Perth tenant contacted us to see if we were interested in selling. Coincidentally we are at the right price. Temant explained that they don't have enough for the deposit and would take at least 12 months to accumulate it.

Initial talks were along the lines of a sale price we are very happy with but a slight reduction in rent for 12 months. Tenant pays an additional $4k month into a trust fund set up for deposit. Settlement would be 12 - 18 months. If tenant does not go ahead with settlement we receive accumulated deposit. If they do then we're all happy.

Price is good, we know the market and have had numerous CMA's done. Plus no agent fees makes it even better.

Thoughts or advice from anyone that's familiar with this type of sale?

 

[beachgurl]

I think tenants actually pay more rent until they are in a position to buy. You are short changing yourself rent and there's no guarantee they will buy it in the end. The idea of this scheme is that they agree on a price now and then when the property increases in value they won't need a deposit as there will be equity in the property.
I don't see any benefit to you in this situation.

 

[moyjos]

Have a look at this thread.

http://somersoft.com/forums/showthread.php?t=80531&highlight=Vendor+finance

And then probably give Paul Dobson a call.

 

[matto_]

Vendor Finance has a lot of proponents around. A lot of the difficulty is in finding the right person to sell to - so you are one step in the right direction.

My understanding is that you need to have a credit licence if you are wanting to set some of these relationships up. Otherwise you would need a reasonably water tight contract (and take an element of the deposit from them up front).

 

[Paul j F]

Thanks .. there is more to this than I orginally thought.

I was hoping to keep it simple. The price more than compensates for the $100/wk reduction in rent. I would rather reduce the rent and increase deposit for tax reasons. btw.. there will be little CGT as the house was our PPOR a few years ago and has not increased much since.

The deposit trust fund would be the same a deposit just takes 12-18 months to get it. Clauses would include things like $4000 a month to be deposited if in arears tenant has 21 days to rectify or we get balance of deposit. etc. etc.

Or is this still considered Vendor Financing?

 

[willair]

Plus no agent fees makes it even better.

Maybe check your rental contract and make sure there is nothing in there that states during the lease that if the tenants buys the property that the property management re company gets a % of the sale..

 

[Florro]

Sorry to dig up such an old thread but how did you end up going with this?

 

[fokas]

Sorry to dig up such an old thread but how did you end up going with this?

Ha! I read through to your post before I even realised the dates. I'm curious how it went too!