Renting property before you buy is a great way to get to know an area. It gives you the chance to decide what it is you might want out of your long-term home, and it gives you the chance to test out different locations.
However, sometimes, tenants are so happy with their current location that they don’t want to move, instead choosing to buy the rental property from the landlord. And if the landlord is looking to sell, then this could be a perfect arrangement for both parties.
The advantages are clear. The landlord can skip over the process of trying to sell the house, forgoing the process of waiting around for the right buyer, constantly worrying if they’re going to have to settle for a reduced price. Furthermore, they can work with someone who they already know is interested in the property and who likes it, meaning they may be more willing to get a price closer to the home’s true value.
For the tenants, the advantage is that they will have already had the chance to learn the ins and outs of the property. They’ll know which rooms get too much sun, where the shady spots are in the lawn, and who the most annoying neighbours are. This gives tenants more confidence when buying the home, and it also means they may have additional bargaining chips to try and get the asking price down.
However, if you do think you would like to buy your rental property, know there’s still a process involved, and you should still approach the sale as if you were buying something you haven’t lived in previously. For example, if the landlord tries to get you to go through the process without a lawyer, take this as a sign that something is wrong.
A good first step is to determine how much you can spend on a home. Then, using this number, still shop around. What can you get from other properties for a similar price? You may find that although you love your current home, your money could be better spent elsewhere. Remember, not wanting to move is not a good enough reason for buying your rental property! This is a big investment that should not be made because you dread the thought of packing up your stuff and moving across town.
Also, think about the area where the property is located. Is it in an area of growth? How good is access to transport and other services? If you ever needed to rent the property, would you be able to? And what kind of tenants would you be able to attract? These kinds of questions might not seem relevant now, but they may be someday, so it’s important to think about them before making a decision.
Once you’ve thought about all of this, consider approaching your landlord. Ask them what they are selling for, and then do an independent appraisal. Perhaps the landlord is only interested in selling because he or she thinks they can get a really good deal off happy tenants.
In conclusion, buying the property you rent isn’t all that different from buying another property. There are some exciting advantages to doing it this way, but you still need to do your due diligence and make sure this major investment is the right one for you in the long term.