Vendor wants to rent back

[gach2]

Signed a contract to an investment property (with some development opportunity)

6 weeks settlement which I dont like but accepted at the time (no real issue to me)

Plan would be to rent while the DA is prepared and at council.

Did initially submit a request to have the settlement delayed for 3 months and was rejected (as expected).

REA has called me and said the vendor is interested renting the property back.

What should i do?

Options i have thought off are:

1) Deal with REA (who would not be my preffered REA as they are not the most local REA - 3 suburbs away)

2) Tell them to negotiate any rental potential through my solicitor (and cut out the REA)

3) Tell them renting back is not an option and if they would like to stay that is fine but only if settlement is delayed. If it fails then have to rent it out on the open market.

 

[D.T.]

I'd personally go with #3. It seems like a win - win, vendor gets to stay in their property and you get to do your DA with less holding cost.

The REA doesn't need to be a part of the conversation if you do let them rent. You can have your chosen property manager take it over at settlement. They can charge him market rent, do proper inspections and everything. Just because he used to live there doesn't mean he gets special treatment.

 

[Jamie M]

I'd personally go with #3. It seems like a win - win, vendor gets to stay in their property and you get to do your DA with less holding cost.

Same.

You'll avoid interest repayments for the period and won't have the hassle of the short term rental.

There are some pros/cons to consider with a long term settlement though. If you do a search you'll find some posts.

Cheers

Jamie

 

[gach2]

3 is definately my preference

bit arrogant maybe - but the risk is if they dont accept I will have the house just before christmas and cant see new tennants going in prior to 1st/2nd week of january

 

[gach2]

Oh yeah, the vendor is not interested in delaying settlement.

Option 3 is pretty much telling them the only way you can spend time in the house after the original settlement date is if you delay the actual settlement.

It is the week before christmas and i hope they would like to delay the settlement atleast till the new year

 

[Jamie M]

It is the week before christmas and i hope they would like to delay the settlement atleast till the new year

You'd assume they'd be up for it - especially at that time of year. No one wants to be moving house right before xmas.

Cheers

Jamie

 

[S.T]

Yep #3, get it happening on your own terms.

 

[gach2]

I would assume so
I would also assume any reasonable individual would be happy (moving costs around xmas itself would have a surcharge im sure)

But then i remember not everyone in this world is a reasonable person

 

[Perp]

There could be a million reasons why they can't delay settlement, other than them being unreasonable.

They may have to settle a divorce, or break-up of a business partnership, or pay a family a member a debt, etc.

They may be selling another property at a loss, and need the funds from this sale to settle that sale.

They might be terminally ill and need the funds to enjoy some quality of life before passing.

They might need the funds to buy a business or a huge Christmas gift or any one of a million other things.

They may have some CGT deadline approaching.

People have all sorts of personal circumstances that we don't know.

There are a million possible explanations for their behaviour other than "they're just unreasonable".

 

[spludgey]

Have you considered getting a 66W (or was it W66?) form signed and releasing the bond to them?
That might persuade them to accept a long settlement.

 

[gach2]

perp - didnt mean this particular is not reasonable as i dont know their story

Was trying to say that even if it was reasoable to delay settlements, not all people are reasonable.

have contacted my solicitor and asked them to pressure to delay settlement and to keep the REA out of any negotiation whether i do rent it back to them.

 

[D.T.]

have contacted my solicitor and asked them to pressure to delay settlement and to keep the REA out of any negotiation whether i do rent it back to them.

Whats the REA got to do with it?
How long are they looking to rent for?

 

[alicudi]

Hi

If I were the purchaser I would keep the settlement date as it is.

I would then tell the vendor/future tenant that you can accommodate them at X amount rental which should be 20% to 30% above market rental. I would also put in the lease that the tenant will allow the new owner unlimited access to the property for purposes of obtaining DA etc. I would also insert a clause into the lease that the tenant is liable to pay for all maintenance whilst they live in the property and that they accept the property in an as is condition.

You have to keep in mind that this vendor/future tenant knows every single problem with the property and could ask you as the new landlord to fix everything under a lease!

This way you as the new owner still settle on the property and you gain a good rental income on the property from the day of settlement.

If they don't accept well just stick to the original deal of settling in 6 weeks time with a vacant property.

Regards,

alicudi

 

[gach2]

At this stage, i have not got full details on vendors intention.

I do not like the idea of the current REA getting involved as im going to assume that he wants me to rent it back and use his firm as the property management. I also would not use his firm as the property manager as they are not the local REA and i have a preffered REA to go through once the current vendor vacates the property.

Alicudi - thanks for the information (will keep that in mind)

Current figures are around 520k property with 420 p/w rental income - so with all expenses I would be most likely loosing around 100 p/w and around 100k in equity locked in this mortgage hence why id rather delay.

I will look into it and see whether there are any tax benefits of delaying as well

 

[gach2]

Just a update from the vendor.

They would like to stay on the property for 2-3 months past settlement.

They have initially offered an amount which is onky $400pw.

In terms of replying should I say we will consider the offer and let you know when we decide?

This will pretty much stall the reply and get it as close as settlement and then say - No, if you would like to stay on this property past the original settlement date then you must delay the settlement for the period you wish the remain on the property.

In giving the vendor limited notification and settlement being around Christmas I can see it will not be easy in moving out of the home and hence better chance in delaying settlement.

Good Idea? Or bad?

 

[D.T.]

Put them through your chosen property manager so that they pay market rate and adhere to all the rules. Just because they've lived there before does not mean they get treated any differently to any other tenant.

 

[Jaggannath]

Just a update from the vendor.

They would like to stay on the property for 2-3 months past settlement.

They have initially offered an amount which is onky $400pw.

In terms of replying should I say we will consider the offer and let you know when we decide?

This will pretty much stall the reply and get it as close as settlement and then say - No, if you would like to stay on this property past the original settlement date then you must delay the settlement for the period you wish the remain on the property.

In giving the vendor limited notification and settlement being around Christmas I can see it will not be easy in moving out of the home and hence better chance in delaying settlement.

Good Idea? Or bad?

I think just be upfront and don't delay. I don't understand why you're trying to mess around in this manner. But perhaps that's just me

 

[Perp]

Just a update from the vendor.

They would like to stay on the property for 2-3 months past settlement.

They have initially offered an amount which is onky $400pw.

In terms of replying should I say we will consider the offer and let you know when we decide?

This will pretty much stall the reply and get it as close as settlement and then say - No, if you would like to stay on this property past the original settlement date then you must delay the settlement for the period you wish the remain on the property.

In giving the vendor limited notification and settlement being around Christmas I can see it will not be easy in moving out of the home and hence better chance in delaying settlement.

Good Idea? Or bad?

Seriously bad idea; it's playing games and IMHO unethical.

They're going to be living in what I assume is a very valuable asset for you, and given that you've purchased the property from them, you'll be exceedingly unlikely to ever succeed against them for any damage caused during their tenancy, as the Tribunal will almost certainly accept that it was existing damage caused during their time as owners rather than during their tenancy.

You're just inviting them to screw you over and give you some of the same treatment. And I predict you'll come off second best in such a ******* competition.

 

[tobe]

Dont worry about the estate agent. Its very unlikely he wants the job of managing your rental. Most agencies have two seperate and distinct businesses. Theres nothing in it for the selling agent to get the managing agent making maybe a couple of hundred bucks gross for a short term rental. Many managing agents wouldnt want short term business, it probably costs them more money than its worth.

Dont delay responding to the vendors, this is unethical, and just silly. Tell them your intentions, like all negotiations there will be a bit of back and forth, it may end up with an extended settlement, it may not.

Not replying to them will make them investigate other avenues, and you may lose this 'deal' altogether.

 

[gach2]

It would be beneficially to my finances and cashflow (can update m financance as of next week)

In terms of the current vendors renting, I have decided that is not going to happen. They have offered an amount a bit under market value and also are only wanting to rent for a short period.

So there is no way they can screw me over as a tennant, if they are able to screw me over as a vendor - that is another question.

I will prob ask my solicitior to ask them if they can provide reason why they are unable to extend settlement - if not interested in extending, mention they will have to vacate the house upon settlement, althought settlement can be delayed for upto 6 months as long as they are ok with me submitting a DA (and accessing propery for DA purposes)