Buying a house, then renting it to the person you bought it from? (sale, apartments)

[rbchamps2]

I made an offer on a house today, and the seller asked, if we would be interested, in letting them rent the house for 3-6 months after the house is sold. How do you guys and girls feel about this, I don't need to get into the house asap, so I could do this. Also how much of a premium would you charge for something like this. I know apartments can charge up to $400 dollars extra for short term or month to month leases. How should I attack this issue?

[phaze]

This is so weird but I know it happens. A friend of mine leased their house to the sellers for 11 days at $150 a day. (The sellers needed 11 days for their new house)

3-6 is too long for me, but if you do I would at least ask for a big deposit (that you will refund if your house is OK). I would at least charge 100 more than your new mortgage. Also, where are you going to stay? Are you renting some where?

[rbchamps2]

I'm renting, so I would be going month to month on my lease.

[ElkHunter]

I've done something very similar.

Get them to sign a 6 month lease and pay up front. If they move early, so be it, they forfit and you can move in early. If they stay the full six months, that's fine too. Also, get a deposit equal to one months rent, non refundable.

You are putting up with a lot by allowing them to remain in the house. Making you orchestrate other plans. It's an inconvienience to you no matter what anybody tells you. Mentally, and physically. For 6 months you'll wonder what they are doing to it. Your putting off your plans to move which puts you and others (that may help) to a disadvantage. Make it worth your while.

I'm not saying that you should take advantage or gouge somebody. But darnit, you are buying the house. What can happen to it in 6 months? Hail? Flood? Wind? Fire? I know, your saying, I'll have insurance. But insurance is just money returned for damages done. It doesn't include the heartbreak of listing all the damage, turning in reports, checking with contractors, taking time off of work to discuss repairs, etc. You get the drift.
You'll have a building that you have no control over. If you were there, you'd be mindful of having a fire extinguisher, making sure outlets have proper things plugged in, lawn is kept up, weeds are controlled, maintenance is done properly. Will they? Or will they say, hey, let's keep it patched together until we leave? Food for thought.

[TFW46]

Does homeowners insurance cover you if someone else is renting the house?

[Poltracker]

Originally Posted by texasfirewheel

Does homeowners insurance cover you if someone else is renting the house?

Good point. No you must have LL insurance. This is one of the biggest issues w/ a rent-back situation. Make sure you have the appropriate insurance and require that the tenant carry renter's insurance for the duration.

[rbchamps2]

After covering all my carrying costs, how much of a premium should I charge, I was thinking $1000, a month.

[Poltracker]

You have to be reasonable. You get a big escrow to cover any damages they may cause or you are unable to see because they have not moved out and you cannot do a walk through, then determine what houses are renting for in that market area. Require them to carry renter's insurance. Also, have a firm move out date and use escalating penalties (i.e. $100/day post move out date) in the contract if they do not move out on time. Getting folks to move on is the hardest and that and damages is where you want to protect yourself.

[houston-nomad]

I don't think it's so unusual... we rented our place back from the buyers for a few months. We agreed upon a price that was more than we had been paying per month, but was about equivalent to their monthly payment (principle, interest, taxes). It gave us time to find a new place.

[westres1]

IA with above in most instances the rent will pay your mortgage. They may be moving overseas or something and need extra time. They may not have expected the house to sale so quickly etc...
your best advice should come from your Realtor.