Vendor wants to rent for 6 months after settlement

Hi All,

So I have recently purchased my first IP with a 90 day settlement period. I was contacted by the Vendors agent to request a 6 month lease to rent. What are the pros and cons of letting the vendor rent it back? There is no clause in the purchase agreement forcing me to do so. It is also likely that they may request an earlier settlement which works for me as I would start collecting rent sooner. I have hired a property manager who will manage my property.

Here's the plan so far:
1. Pre- settlement inspection 3-4 days prior to settlement.
2. Get a detailed condition report done on the date of settlement with pictures.
3. A proper leasing agreement for 6 months would be signed and registered as with any new tenant.

Can 1 & 2 be combined?

Here's the pros and cons I can think of.

Pros:
1. Property occupied from the date of settlement.
2. They have offered to rent the property at slightly higher rate than the market rates (perhaps to save on moving costs and securing the lease)
3. Previous owners so they hopefully treat the property with respect.

Cons:
1. They might wait till settlement and ask me to repair any equipment that they know is faulty.
2. Being previous owners they might not transition well into being tenants (might still think that they own the property and act accordingly)

Has anyone experienced this and what would you guys recommend? Any feedback is appreciated.

Thanks

 

Exactly like you have said. Get settlement inspection and entry report done so you can make sure all repairs are correct and any damage they caused fixed.

I would get them do pay above market rent which they said they would as you are saving them marketing costs and I would also see if you can negotiate with the PM for not letting fee.

When they leave you do an exit inspection and go through the normal channels.

We offered it to a vendor once as part of the offer which we were negotiating on, however they didn’t like how aggressive I was with the negotiating and sold to someone else - was trying to tell them that yes my offer is less but I will save them move costs... anyway found a better house and bought it instead

 

Think you have got most of it covered. I did it recently on a shorter term 2 months and it was a bit of a painful experience as we ended up with a licence agreement rather than a rental agreement. This meant no PM so I had to deal directly with tenant and no bond.

Other potential con is that furnishings hide damage you would see on a vacant possession and condition report doesn’t pick these up so can end up a bit messy when they move out.

 

Bells ringing from here...
Landlords insurance!!!!
Check with the insurance company what they would like from you.
I do hope you mean signed inspection report!
I hope this helps

 

Thanks Big Will. Nice to hear that you got a better deal in the end

 

Th

Thanks Skinman. Yes the furnishings are a potential problem. I would try to get an inspection report as detailed as possible

 

I have purchased a landlords insurance (building). I will add the rental cover from settlement. You are right. I should ring them and check if they have any requirements.

Signed inspection report as in signed by Vendor/Tenants? I have done a pre purchase building inspection done.

 

I would never do it. Con 2 is a deal breaker for me. They will have enough money to rent once they sell. I would make it a clean break.

 

Thanks for sharing your perspective hobartchic. I am thinking about this more than the first con too

 

Yep. Too risky in my opinion. I would want the place vacant so I could inspect it thoroughly and find new tenants. Offer to extend settlement instead.

 

We had rented out to previous owners in 2 IPs (different states) for 4-6months (at higher rent), did not have any problems. we will do this again if we bought another IP....
Actually problems only came with new demanding tenants in one of the IPs (less rent, after 3 weeks vacant reletting period), I guess it depends on individuals...

 

I've done it before, worked out great.

Just make sure you get written into the rental agreement that once they give 4 weeks notice.....that for the next 3 weekends you have access for showing to new tenants.