From Renter to Owner: How to Approach Your Landlord to Buy Your Rental Property
For many renters, the time will come to transition from tenant to homeowner. But what if you want to avoid the crush of the housing market and buy the rental home you are already living in? Can you make an offer, even if the house is not listed on the market?
In Australia, it’s more common than you might think for renters to buy the house they are renting. While it may seem illogical to think about purchasing a property that’s not technically for sale, there are many tenants across the country looking to do just that. So, if the property isn’t on the market, how do you approach your landlord with an offer?
What’s the best way to approach a landlord to buy a rental property?
The best approach is through your real estate agent. But, before you think about getting in touch to make an offer, it’s important to make sure that you have done your homework and are prepared to make a serious offer to buy the property.
Understand the property market
To make a realistic and enticing offer, you’ll need to understand the property market in your area. Go online to look at property listings that are comparable to yours. You are looking for properties that are similar to your rental property in terms of:
- Land size;
- Number of bedrooms;
- Number of bathrooms;
- Proximity to amenities; and
- Age and condition.
After identifying similar properties for sale in your area, pay attention to the sales figures that they achieve and record the prices. You will need this information to have a clear understanding of what your rental property is worth. You want to make an informed decision about how much you are willing to pay without offering too far above what the property is actually worth. You need to contact property conveyancing Brisbane and get expert advice.
Put your offer in writing
The easiest and most professional approach is to make a formal offer in writing through your agent. By putting your offer in writing, you avoid any misconstrued messages. In your letter, you should include such things as:
- Who you are;
- What you like about the property;
- Why you are making the offer;
- A comparison of similar properties that have recently sold; and
- What you are offering to pay for the property.
It’s also a good idea to think about the sale process – you and your landlord can avoid a great deal of stress and save a lot of money by conducting a direct sale. When a property is publicly listed, it needs to be marketed to buyers; a costly process that your landlord can avoid by selling the property directly to you.
Also, by selling the property to you, the owner does not need to spruce the place up to attract buyers – you’re already impressed! By conducting a direct sale, you could negotiate a better deal that accommodates this saving for both parties.
Will my landlord accept my offer?
Whether or not a landlord will sell a property depends on their circumstances and the value of your offer. People buy investment properties to make money. They are earning a large income by selling to you, but they are also losing out on future capital gains and rental income. Their decision to sell the property will probably be influenced by factors such as how much of the mortgage they have yet to pay off and whether they want to continue to be responsible for the ongoing costs of owning a rental property.
If your offer doesn’t cover the remainder of their mortgage with a significant amount of money left over, they may be unwilling to sell. However, you may find that you’ve caught them at the right time. Perhaps they have been thinking of selling or are struggling to keep up with the ongoing land rates. You never know – your offer may very well be the sign they were looking for.
Are you prepared if they accept your offer?
Don’t let the excitement of making an offer cloud your judgement. Are you prepared for what comes next if your landlord is prepared to accept your offer to buy the property? Here are some points to take into consideration.
If your landlord is interested in pursuing your offer, the first thing they will likely do is have the property appraised to determine its market value. The last thing you want is to be caught out undervaluing the property in your letter of offer, so this is a step you could take prior to reaching out. A property valuer will provide you with documentation determining their estimate, which you can include in the offer.
Even if your landlord quickly agrees to your offer, they still need to have sale documents drawn up, which can take time. In the meanwhile, word could get out that your rental property is available for sale, leaving you at risk of being gazumped (where someone else makes a higher offer). The fact is, agents work on behalf of the vendor, not the seller – their job is to get the highest price for the house. If they have a buyer in mind who they believe would be willing to offer more, they may let that buyer know the property is available for sale.
Although there’s not really much that you can do to stop gazumpers, you can ensure that you are as prepared as possible to get the sale through quickly. That means having your finances in order before reaching out to your landlord. By getting the property appraised and then seeking pre-approval from a lender, you can approach your landlord with a solid offer.
Make sure you’re certain
Before you dive into the property purchasing process, it’s important to be sure that you have thought the decision through. Although it may seem easier to buy the property that you already live in and are familiar with, you could be missing out on your dream home somewhere else. Don’t settle for a property that doesn’t quite suit your needs if there are similar properties in the area that might be a better option for you.
It’s also important to take into consideration the expenses that you will incur as a homeowner. As a tenant, you don’t have to worry about costs such as:
- Council rates;
- Water rates;
- Strata levies;
- Home insurance; and
- Land rates.
Depending on your interest rates, you may end up paying less in repayments than you ever did on rent. Home-ownership also provides you with the opportunity to borrow against the property to finance a loan on another property if you find that the rental that you want to buy now doesn’t suit your lifestyle in years to come. It could eventually become your investment property that, in all likelihood, would pay itself off in rental income.
From Renter to Owner
Once a contract of sale has been drawn up, it’s wise to have it reviewed by a property conveyancer, who will advocate on your behalf to ensure you are getting a fair deal.
Jim’s Property Conveyancing has offices in Melbourne and Brisbane and can provide you with comprehensive advice and assistance moving through your property transaction. For expert advice on property conveyancing services in Australia, please contact our friendly and experienced staff on 13 15 46. You need to contact property conveyancing Melbourne and get expert advice.