Would you buy an IP with a six year lease ?

T

Trying2Learn

Hi

Sorry but yes I ask a lot of questions lol

We are looking at a property that the owner wants to sell and rent it back for 6 years, she would like 10 but the real estate advised her to start with 6 years.

She wants no PM and will deposit the money directly into your account fortnightly. She will also take care of any maintenance that needs to be done.We are only allowed to inspect it once a year. Other than that just leave her be, she also has a 3-4 dogs that would live with her also

So I guess I am asking - would you ?
 
Is it CF+?

Is she credit worthy?

Is she likely to damage the dwelling during the 6 years or allow it to fall into disrepair?

Can you kick her out if she fails to meet her obligations?

Is it something you would want to own in any event?

Is it close to land value?

The answer is maybe.
 
boomtown said:
Is it CF+?

Is she credit worthy?

Is she likely to damage the dwelling during the 6 years or allow it to fall into disrepair?

Can you kick her out if she fails to meet her obligations?

Is it something you would want to own in any event?

Is it close to land value?

The answer is maybe.
Click to expand...

I am unsure if she is credit worthy, she has lived in the house for many years and is doing a course (via correspondance is my guess) and needs money to finish it, therefore she is selling and renting back.

I think that it would be hard to kick her out if she did not pay the rent. In the lease agreement it does have a clause that states the the rent will increase yearly to fall in line with CPI

It is in one of those Adelaide suburbs just out of the city that was very much a housing commision area and is now being sold off and rebuilt.

We where thinking you could sit on it for 6 years then bulldoze it and rebuild something
 
- Why doesn't she want a PM?
- Does she accept there will be market rent increases?
- They always plan to pay the rent. :rolleyes:
- Easy to say she'll take care of maintenance. Wonder what will happen when $1k hot water service needs replacing? You're liable, not her.
- Why only 1 inspection a year? What happens the other 51 weeks of the year she doesn't need to clean the place?

Nope, I wouldn't touch it.
 
You need a property lawyer to do this properly. A standard residential lease is completely innapropriate.

For starters anything over a 5 year lease may require planning approval - pretty sure it does in Qld.

You are in deep waters here and not something to be taken lightly. Doesnt mean that it may not be a good deal though.
 
My thoughts are:

She is pretending that she is not actually selling. She is in a high level of denial. This could be a very emotional rental.

I would not let her dictate the terms. Work out what would work for you and offer that. If you let her take control from the beginning this will end in disaster.

No agent clause is dependant upon her always making rent on time - otherwise will revert to agent management.

Application, bond, initial inspection as per normal tenancy.

Would not agree to only one inspection per year. You may need access for valuer etc or the condition of the house at one inspection may suggest inspections need to be made more regularly.

I would want to meet her first up to see if she is some-one that I could get along with. If not I would avoid this like the plague.

What will happen at the end of the six years? What are her legal rights to stay?

Legally can she be made responsible for maintennace? What if your ideas on what is required maintenance wise do not agree?

Is the deal better than an eqivalent house? I would only consider this if it was a vastly superior deal.
 
Sorry I am led to believe she will fix any problems and we will pay the bill. It also says in the lease that the fruit trees will be for exclusive use of the tenant only.

I do think that she is justa really really really private person.

The thing that does concern me though is that in three years something happens and we have to sell it, it would be with 3 years of the lease left and a little harder to sell. Or can you break the lease ?

Thank you all for your input it helps me think in different directions lol
 
If she has looked after the place for the last few years, there's no reason she would trash the place now?

One of your biggest issues will be the terms of the lease, you need to include some fineprint of your own such as vacating after 6yrs or on the sale of the property?

How about asking her to leave some money in for a period of 4yrs (say 40%)
 
We are ready to buy our first IP and all of your knowladge is fantastic. Maybe I was just surprised to see a house with a tenant for 6 years and a little happy not to have to find one all the time

Normally how regulary do you inspect an IP ?
 
we are always told by the gurus, and the more experienced investors (here and in books), that you always want the most control possible.

This current deal sounds like the vendor wants the money for their house, but still wants to retain control of the property - thats a NO-NO in my books. How can you win from this deal?

The only way i would go for this deal is if it is a more standard rental agreement, with regular inspections (not annual!), full access as per normal tenancy agreements, and the ability to increase rents based on fair market value upon review every 6-12 months.

I kinda like the idea of a long term tennant, so long as they are a GOOD tennant. You DO NOT want to be stuck with a long term nuisance tennant.

If she doesnt like the idea of being a NORMAL tennant, then tell her she shouldnt sell, and walk away. Plenty of other good deals around.

Thats my thoughts.
 
T2L, in a rush to get to the Adel Utd game so I can't go on too much.

Had a quick look at the listing, and to me from the way the agent has written it up, it may not even be a good block for development to begin with - which is the reason you are interested in the first place.

Don't have time to narrow down the exact property now, but flick me the address and I'll run the ruler over the block tomorrow morning for you...

GO ADELAIDE UNITED!!!....
 
Will you need to get a mortgage, or do you have enough cash on hand? If you need a loan bank requirements may limit leases to something like 2 yrs (mine does anyway).
 
Insist on a standard 6mth lease to start, and if she doesn't like it, move on.

There is no shortage of tenants around, or houses to buy, so ask yourself, what is the benefit in keeping her on with all these conditions?
 
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