Homebuyers

Interested in Buying Your Rental Home? This is How to Make That Happen

It’s not uncommon to want to purchase the home that you’re currently renting. You may love the neighborhood, have a manageable commute to work, or just realize that it’s the place you want to live for longer than a lease.

You may even be able to convince your landlord to sell you the property. But first you need to make sure you can afford the home, craft a compelling offer, and be ready to negotiate.

“Landlords are often asked if they are willing to sell their home to their tenant and there are many things a tenant can do to optimize a sale,” said real estate broker Betsy Pepine of Pepine Realty in Gainesville, Fla.

So, how can tenants increase their odds of owning their rental?

1. Figure out if you can afford to purchase your rental 

Although you may love your rental, the reality is that you must be able to cover living expenses beyond rent. To begin with, find out if you can afford the home.

Contact a real estate agent on your own, use public databases, or real estate platforms to research the value of the property. Look at how much similar homes of approximately the same size have sold for recently in your area.

Figure out if you can cover a down payment on that price. You may be able to put down as little as 3% for a Conventional loan or 3.5% for a Federal Housing Administration (FHA) loan. However, the more you put down, the more compelling your offer may be.

You might want to use a home affordability calculator to see if you can afford the monthly mortgage payments. Type in the estimated purchase price, the size of your down payment, current mortgage rates, as well as the estimated property taxes and monthly insurance costs.

Don’t forget to add in about 1% to 4% of the home’s price for annual maintenance costs.

2. Get a mortgage pre-approval letter

If you’re going to need a loan to buy the home, you should get a mortgage pre-approval letter. This shows your landlord that you’re likely to be able to get the financing needed to purchase the property.

“Speak to a lender to understand the different [mortgages] you may qualify for, what your down payment and mortgage payment would be, and how long it will take to process the loan should you come to an agreement with the owner,” said Pepine.

If you plan to buy with cash, print out a proof-of-funds statement from your bank.

3. Learn more about your landlord

It doesn’t hurt to learn more about your landlord. If your landlord is an investor, that could work in your favor.

They might be motivated by financial reasons to sell. So, making an offer to purchase the rental could be an effective strategy.

“For you, it’s an emotional decision,” said Pepine. “But for the investor, it’s usually a financial one.”

4. Investigate the property

Some scenarios could cause the landlord to really consider your offer to buy, such as those who inherited property. For example, they might have not considered becoming a landlord until the inheritance.

Researching the deed history could help you learn more. Often, this information can be found through your county’s property appraiser or other local government.

5. Put together an offer on the rental home

Once you know your finances, the value of the property, and how motivated the owner could be, begin the process of drafting an offer on the home. Just make sure it’s an attractive one.

“Many mistakenly assume that sellers only care about price,” said Pepine. “Sellers also care about terms.”

This could be limiting the number of contingencies you put into your offer, not asking for repairs, or offering a fast closing. Making a large down payment and offering to pay for the landlord’s title insurance or other closing costs can also make your offer more attractive.

You live in the home, so you likely know the condition first-hand.

Remember, there could be an emotional attachment. This could be your landlord’s childhood home or where they raised their own family.

“If the owner is sentimental about the house, they may care more about how you are going to maintain the property and create memories there than a hard-core investor with no personal ties to the property,” said Pepine.

6. How to negotiate with your landlord after your offer is presented

Arrange to meet with your landlord in a virtual meeting, such as on Zoom, or in person to see if they would be interested in selling the property. They may not be initially interested, but they may end up being eager to make a sale.

Be sure you have a pre-approval letter from a lender or a proof-of-funds letter along with comps of recently sold properties. Your research can improve the chances that your offer will be given serious consideration.

But go in prepared to negotiate. Your landlord will likely want to get as much as possible for their property.

Negotiations can be complex. So, during the bargaining, be ready to answer questions and make compromises. Try to keep your emotions in check.

Finally, make sure you don’t offer more for the home than you can comfortably afford. Be prepared to walk away from negotiations if your landlord’s requested price is not within your reach.