One Northern California investor makes it a point to put renters’ needs first when buying the home they live in.
Landlords don’t always have it as easy when it comes to selling a home with leased tenants. If renters are on a month-to-month lease and cooperative, the homeowner will usually send a notice to vacate and list the home for sale once emptied. What about situations where the renters are not cooperative or the seller needs to sell during a lease period? Since many buyers want to move in after purchasing, they won’t even consider a home that has renters. This leaves the seller at a disadvantage.
Jake Knight, owner of Skye Homes, a Bay Area and Sacramento-based investment company, has come up with a creative solution that works for the seller and the renter yet doesn’t require an eviction.
Here’s how it works:
An offer to buy the home is made to the seller contingent upon a successful lease buyout. The seller introduces the buyer to the renters and the renters give input on how long they need to move out. The “cash for keys” buyout offer includes cash compensation as an incentive. The negotiation is done with the seller’s consent. If the negotiation is unsuccessful, there is no pressure on the renters to move out, and the seller has lost nothing but a short period of time while negotiations took place.
“I like to ask renters: ‘If you were to move out early, how much time would you need and how much money would you need?’ If their lease is scheduled to end a few months later, for some people it’s very appealing to move slightly earlier and get extra money in their pocket. I usually wouldn’t approach someone who moved in recently and ask them if they want to move.”
In some cases, the renters are not paying rent or do not have established leases in place. Jake believes charging a nominal rent per month (which he usually credits back after they vacate), in addition to surplus “cash for keys” money, gives renters an incentive to vacate on time plus flexibility to find a new home without being under pressure. “They feel like they’ve gotten a good deal from someone who wasn’t pushy or greedy,” Jake added.
Short Term Leases & Seller Benefits
Jake notes that this approach works best on shorter term leases. “In the Bay Area, I like 5 months or less depending on the time of year. It may be worth it to time it up with a hot spring selling market, even if it’s slightly more expensive to hold a few more months.”
The benefits for the seller are more control over the timeline, help with tenant negotiation (if relations have soured or they’re just not comfortable doing it), and knowing that their leased renters are being taken care of.
Jake added: “As a business owner I’ve always believed that if you take care of your customers they will take care of you. It’s the same thing with buying real estate. Take care of your clients and they will take care of you.”
