LOSING THAT GREAT TENANT TO HOMEOWNERSHIP? YOU HAVE OPTIONS

by Tim Herriage

LOSING THAT GREAT TENANT TO HOMEOWNERSHIP? YOU HAVE OPTIONS

by Tim Herriage

by Tim Herriage

ARE HIGH RENTS CREATING FIRST-TIME HOMEBUYERS AMONG YOUR TENANTS?
As an investor losing a good tenant is never ideal on a number of points: a vacancy, a rental refresh, cost of marketing, responding and screening prospective tenants and the whole lease up “getting-to-know” your new tenant process. Don’t panic. You have options.
A tenant with monthly rent that is a large portion of their income, possibly a rent increase, may be inclined to ask the question……Should I continue renting or should I buy?
This is a classic dilemma facing a household considering stabilizing living arrangements. This applies to a household of one, or a family of many.  The question is answered by satisfying one of two questions” Am I likely to be staying in the job/location for more than a couple of years” and “Is renting or buying cheaper and economically wiser?”
REDFIN INSIGHT
Redfin, is a next generation real estate brokerage that positions itself as redefining real estate in the customers favor, most specifically in listing or finding, and transacting the sale. To improve their appeal and process they regularly survey their audiences and markets. This latest survey was to determine if there is substance to the argument that “high rents are driving first-time homeowner purchases.”
Redfin received 1,887 responses from recent homeowners in 41 states and Washington, D.C. The survey was conducted August 2016. This illustrates current decision shifts in the rent vs buy argument:
8-31 Buy ConcernAffordability is the dominant concern, but embedded in this is the conundrum of paying high rent to be in the home the tenant wants versus saving for a down payment on a home purchase.  In this conundrum is a lesson for investors looking for alternative investment strategies.  That rent payment could become a loan payment and secured long-term investor cash flow, with a mortgage security over the house. Rent payment becomes a mortgage payment, along with a significant reduction in rental management and expenses for the investor.  There can be compelling convenience and financial benefits for a tenant transitioning to a homeowner in this property also, especially if their are school-aged children involved.  There are a number of services that can help you transition and manage these sorts of private mortgages. 2020 REI can help you structure this.
WHAT ARE BUYERS LOOKING FOR?8-31 What's Important
These criteria come as no surprise and mirror what wise rental investors should be seeking in a single-family residential rental.
Lessons from this survey and any long-term  discussion about selecting rental properties is the fact mid-market renters are not much different than mid-market homeowners.  Investors should position to answer their tenant needs in terms of housing goals, and be able to adapt if the rental market begins to peak by shifting to a position of seller and maybe lender.
I have number of colleagues in this business who have converted much of their rental portfolio into private loan portfolio. Many of their new borrowers began their relationship with this investor as tenants, with no intent to purchase. These family goals changed and the investor understood selling these properties at near market after the properties have paid for themselves as rentals was a sound strategy and reduction in his management time, expense and responsibility.  These were never, and are not, a rent-to-own strategy.
2020 REI Companies may be able to help you define and execute a combination tenant to buyer exit plan, where financing (for the tenant or the investor) may be necessary. For help call 2020 REI.  

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