Thoughts on renting a house back to the sellers?

Flyin Irishman

We made an offer on a house today, and the estate agent got back to us and said that the seller's are pleased with the offer (but haven't accepted it yet) but wanted to know if we would be interested in buying the house but renting it back to them for 'a few months'.

No real details yet (how many is a few? What stage of buying/building/renting are they currently at etc.) so we haven't decided one way or the other until the estate agent gets back to us with more details, but I was curious what peoples thoughts are on something like this as we never considered the idea of becoming landlords before and aren't sure of the potential pitfalls

domrush

Flyin Irishman wrote: »

We made an offer on a house today, and the estate agent got back to us and said that the seller's are pleased with the offer (but haven't accepted it yet) but wanted to know if we would be interested in buying the house but renting it back to them for 'a few months'.

No real details yet (how many is a few? What stage of buying/building/renting are they currently at etc.) so we haven't decided one way or the other until the estate agent gets back to us with more details, but I was curious what peoples thoughts are on something like this as we never considered the idea of becoming landlords before and aren't sure of the potential pitfalls

Where are you going to live yourself (assuming its not an investment)?

Can’t help but feel you’d find a hard time making them leave if you ever wanted to live there

Flyin Irishman

We're currently renting so in theory we could continue to live in our current house if it was a short-term arrangement, but yeah the idea of how powerless we would be if they didn't leave in the agreed timeframe does worry us

Graham

Unless you intended to be landlords, I wouldn't touch it.

Your mortgage lender assuming you're getting a mortgage is unlikely to agree to it. Vacant posession!
You're granting the previous owner all the protections afforded to tenants.
You're paying I assume several hundred thousand to house somebody else.

dennyk

That's a monumentally risky idea; there are a lot of things that could go very wrong and end up costing you a lot of money and leaving you with nowhere to live.

Just for "fun", consider a worst case scenario; your new "tenants" burn the place to the ground, your homeowner's insurance refuses to pay out because you were letting the property to tenants in violation of your policy terms, and your bank cancels the mortgage and demands immediate repayment in full because you were letting the place out in violation of the terms of your mortgage and/or because you weren't carrying valid property insurance as required by the terms of your mortgage and their collateral on your six-figure loan is now a pile of ash. Now you're a few hundred grand in debt with a judgement against you that is going to be garnished from your future earnings and assets for the rest of your life, and you'll never see a penny from the now completely broke former owners who destroyed your house because they don't even have any assets for you to put a lien on anymore.

Of course that scenario is unlikely, to be fair, but it's far more likely that they'll end up overholding and staying there for months or years before you can legally remove them, or that they'll just tear the place up in the ordinary way of bad tenants who don't care about other people's property, or you'll end up paying more than you make in rent because of the higher interest on what's now a buy-to-let mortgage and the higher premiums of a landlord's property insurance policy, or the idea will just torpedo your mortgage completely when your lender gets wind of it and the sale won't even go through anyway.

10pennymixup

I agree totally with what others say. It's a bad idea and absolutely little to no advantage to the buyer.

Just throwing something else out there. If the contracts are signed and exchanged with a closing date a few months later, with a reduction in the contract price equal to a few months rent, would that work?

Or is it an equally bad idea?

cannotlogin

The gain is all theirs and the risk is all yours.

You also have the issue with the mortgage in that your agreement with the bank will be that you are purchasing a private home rather than an investment property.

Do you want to be a landlord? What if they overhold because they can't fund somewhere to move to or their mortgage application is rescinded because one of them loses a job? Or they can't pay renr for the same reason? Do you want to risk having to pay higher rates? Will the bank look for a larger deposit for an investment property? How will the bank know you ask? Well if solicitor is being honest he has to confirm vacant possession etc. Any solicitor worth their salt will tell you not to entertain it.

Mitzy

Another thing to factor in here is the additional costs.
You will have to pay a full mortgage on the property plus rent on your existing home.
Any rent you receive from the current owners will be liable to tax of approx 50%.

There is nothing in this for you OP. I wouldn't even entertain the idea personally.

antoinolachtnai

Why would they not sign contracts with you, but with a move-out and closing date at a date that suits them? They could give you some discount for agreeing to this.

Your solicitor and your banker would be reluctant to hand over a pile of cash without you actually taking possession of the property.

There are problems with a late closing date too of course. If your mortgage falls through in the interim for instance, you will be in trouble.

JimmyMW

Id imagine the sellers need the cash now and to move out a few months down the road so a late signing will be of no benefit to them. A family member did this years ago when tenants rights were not as strong and it was a disaster, house was half wrecked when it was handed over, doors broken off of the kitchen etc, i would advise to stay away from this one anyway.

fago

Just a post to the contrary.
We sold to upgrade mid 2019, and the purchaser was a cash buyer. It suited them (as they wanted the house but aren't ready to move for personal reasons) and suited us, as it meant we didn't need the churn of move and storage etc.

The contract was subject to an initial 6 month lease, with rent and deposit etc. On the day we sold we signed the tenancy agreement for the initial 6 months. All above board registered with PRTB etc.

Landlord trusts we're not going to wreck the place based on the fact we owned it for a number of years and had taken the necessary care. I would hazard there's a difference between a home owner flipping to renting the same house and "tenant who will wreck everything".

Bonus for landlord is the cash they had sitting in the bank is now getting a return with them having to make €0 investment in the property.

However what I described above is a pretty unique set of circumstances, and not yours, in your case it doesn't make sense as you are renting.

antoinolachtnai

JimmyMW wrote: »

Id imagine the sellers need the cash now and to move out a few months down the road so a late signing will be of no benefit to them. A family member did this years ago when tenants rights were not as strong and it was a disaster, house was half wrecked when it was handed over, doors broken off of the kitchen etc, i would advise to stay away from this one anyway.

I’d say you might be right!

If this is the case then what the seller really needs is a bank. I presume the OP is not a bank!

This could still be solved by giving them flexibility on the date, so they could close anytime between now and a certain date in 2021, but they must close on that date, come what may.

It still might not suit the OP of course.

Flyin Irishman

Thanks for all the feedback. We were already hesitant for the reasons people have mentioned about how it could go wrong if they weren't ready to leave in the agreed timeline, but had never even considered the (now obvious) aspect of how it would probably violate the terms of our mortgage.

To be fair to the sellers, the estate agent just mentioned it as a thought they had expressed to him so I wouldn't be surprised if it's something they hadn't fully thought through yet either and were just weighing up their options (especially because we had made it known when making our offer that we are flexible on time and don't mind waiting a few months before closing to ease their move). The estate agent said he would get more details/information from them so we just wanted to get our heads around the idea in the meantime.

Flyin Irishman

antoinolachtnai wrote: »

I’d say you might be right!

If this is the case then what the seller really needs is a bank. I presume the OP is not a bank!

This could still be solved by giving them flexibility on the date, so they could close anytime between now and a certain date in 2021, but they must close on that date, come what may.

It still might not suit the OP of course.

I wish!

brisan

10pennymixup wrote: »

I agree totally with what others say. It's a bad idea and absolutely little to no advantage to the buyer.

Just throwing something else out there. If the contracts are signed and exchanged with a closing date a few months later, with a reduction in the contract price equal to a few months rent, would that work?

Or is it an equally bad idea?

What happens if your mortgage approval runs out and its not renewed
What happens if you or your partner lose a job or suffer a reduction in income ?
Too risky .
Either a normal closing date or look for another property

Thoie

I sold a place a few years ago, and to be honest, it sold a lot quicker than I was expecting. However, I'd told the estate agent that I wouldn't be ready to move for about 4 months, and they'd let prospective buyers know that. The eventual buyer was happy enough knowing up front. He put a deposit down with the estate agent on the agreement that I'd be moving out at the end of June, and we'd close near then. The solicitors got everything ready (which took longer than expected) and we both signed closer to my move date.

If you're not in a desperate rush to move, you could let the estate agent know that you're willing to close in "a few months" rather than immediately if that works for them, but that your mortgage approval is for your principal private residence.

Pkiernan

How are you going to get them out if they refuse to leave?

the_pen_turner

Could they move out and hand over to you. You move in and rent them the rest as a licence.

joeguevara

How about swap houses? You move in to the one you bought and they move in to the one you are renting, subject to your landlord agreeing.

3DataModem

Flyin Irishman wrote: »

We're currently renting so in theory we could continue to live in our current house if it was a short-term arrangements

Give them your current place for a few months, assign the lease for example.

Otherwise I wouldn't touch it. A tenant has a lot of rights vis-a-vis wear and tear, access, etc that I would not be willing to give up.

BrokenArrows

Your solicitor and bank won't allow it.

You would need to get a buy to let mortgage. If you have a residential mortgage then the solicitor won't be involved.

You're just going to shoot yourself in the foot if you agree to that.

twowheelsonly

joeguevara wrote: »

How about swap houses? You move in to the one you bought and they move in to the one you are renting, subject to your landlord agreeing.

You could try this and maybe offer to store some of their furniture for them if there is space until they're ready to move to their new place.

I'd imagine that their issue is that they will have to find somewhere for a few months which might not be easy and it would entail two moves within those few months. They're probably thinking that if they could stay in situ for now it would be an easier move in the long term.

amadangomor

joeguevara wrote: »

How about swap houses? You move in to the one you bought and they move in to the one you are renting, subject to your landlord agreeing.

Why would they bother?

joeguevara

amadangomor wrote: »

Why would they bother?

Because they want a house and the others want a short term let. What do you mean why would they bother?

brisan

joeguevara wrote: »

Because they want a house and the others want a short term let. What do you mean why would they bother?

If they want a house to live in why buy a BTL ,because that's the way the bank will look at it

joeguevara

brisan wrote: »

If they want a house to live in why buy a BTL ,because that's the way the bank will look at it

That is not what i said at all.

brisan

joeguevara wrote: »

That is not what i said at all.

You said the vendors want a short term let
The bank will offer a mortgage on a property with vacant possession at one rate and deposit
A property without vacant possession no matter how short term is a different animal to the bank
Tenants have rights and its very hard to shift them if things go tits up

joeguevara

brisan wrote: »

You said the vendors want a short term let
The bank will offer a mortgage on a property with vacant possession at one rate and deposit
A property without vacant possession no matter how short term is a different animal to the bank
Tenants have rights and its very hard to shift them if things go tits up

I didnt say that.

I said THe OP should move into the house they bought and the people selling the house should move into the house the OP is currently renting. Problem solved.

brisan

joeguevara wrote: »

I didnt say that.

I said THe OP should move into the house they bought and the people selling the house should move into the house the OP is currently renting. Problem solved.

What if the landlord disagrees with a short term lease
What if the vendors do not like the property
What if the vendors do not want 2 house moves in quick succession
Too many imponderables

joeguevara

brisan wrote: »

What if the landlord disagrees with a short term lease
What if the vendors do not like the property
What if the vendors do not want 2 house moves in quick succession
Too many imponderables

Hence my 'subject to landlord agreeing'.

Jaysus, it was an option not a bloody demand.

JustAThought

I can see how it could go pear shaped for the OP on a number of fromts - but also how it could be handy for the sellers as they might not have somewhere fixed to go yet or may know that their new place might take a few months to be ready/ available. They just might not want to have to pack and move twice within a short timeframe or to have to try and find a short term rent which can be a nightmare.
You could consider their (detailed) offer and reduce your buying offer price to reflect a fair monthly rental for the delayed
period they are suggesting - taking into account the 50% hit in rent tax and the put in a date for them to be out - if they and your mortgage loan approval will streatch that far. This would show goodwill and accommode their needs while incorporating the ‘rent’ into a reduced price
offer and still allow you to gain vacant posession by an agreed date that suits everyone and not being sucked into the renting/no evictions vortex the government has created.

I’d also be pissed off at their estate agent for
putting such a wishy washy proposal to
you with no detail. Unless they did
just innocently fly it by them without thinking it through. I wonder how many viewings did it get and if there are other viable bidders?

brisan

JustAThought wrote: »

I can see how it could go pear shaped for the OP on a number of fromts - but also how it could be handy for the sellers as they might not have somewhere fixed to go yet or may know that their new place might take a few months to be ready/ available. They just might not want to have to pack and move twice within a short timeframe or to have to try and find a short term rent which can be a nightmare.
You could consider their (detailed) offer and reduce your buying offer price to reflect a fair monthly rental for the delayed
period they are suggesting - taking into account the 50% hit in rent tax and the put in a date for them to be out - if they and your mortgage loan approval will streatch that far. This would show goodwill and accommode their needs while incorporating the ‘rent’ into a reduced price
offer and still allow you to gain vacant posession by an agreed date that suits everyone and not being sucked into the renting/no evictions vortex the government has created.

I’d also be pissed off at their estate agent for
putting such a wishy washy proposal to
you with no detail. Unless they did
just innocently fly it by them without thinking it through. I wonder how many viewings did it get and if there are other viable bidders?

That is about as good as it can get .
As you say once the mortgage approval lasts that long and the buyers employment is secure and they are willing to wait it could work

10pennymixup

brisan wrote: »

What happens if your mortgage approval runs out and its not renewed
What happens if you or your partner lose a job or suffer a reduction in income ?
Too risky .
Either a normal closing date or look for another property

Two good points that I'm sure the OP will take into consideration when weighing up how much this particular property is worth to them.