Finally dipping our foot in- Thoughts about Rent-Back?

[jfel]

About to submit an offer on this home-

https://www.redfin.com/CA/Chula-Vista/2103-Palo-Alto-Dr-91914/unit-80/home/7531309

If you remember my post from earlier this summer, you’ll see its kind of the opposite of what we were originally hoping for…being an attached townhouse with high HOAs and Mello-Roos and all.

In the end we decided at this time, getting into the best neighborhood we could afford was more important than our desire to own a SFD. I’m expecting our second baby any day now and while our children are young, realistically we don’t have the time or energy to maintain a big lot. This townhouse will meet all of our needs and most importantly its in one of the most desirable neighborhoods in Chula Vista. (I have come to terms with being the stereotypical southern Californian millennial living in a PUD.)

Currently the seller has an offer on their replacement home. They are hoping for a short escrow and a rent-back of 30+ days. (CAR Residential Lease After Sale.) From our understanding, they recently welcomed newborn twins and already have a few kids… for them its the convenience of securing their new property, not having to move twice, and not having to move in a rush.

We will be a cash offer and our current home is rented month-to-month. And because I am 38 weeks pregnant, we are not necessarily in a rush to move as well. I think everything works out to benefit both parties…but I am also a first-time homebuyer and obviously have never been a landlord.

Please tell me about all the ways I could get screwed and must cover my butt?

The only thing I could think of is to treat them like any other tenant, and demand proof of renter’s insurance as well as talk to our insurance company about having our homeowner insurance policy accommodate being a landlord for 1-2 months.

What else?

[gzz]

It takes 3 minutes on the phone with your agent to convert HO Ins to a rental policy and it does not cost that much more.

The best way to protect yourself is to ask for first and last months rent at closing.

[djc]

I’d never do it. Too much that can go wrong.

Do you want to be a landlord?

[(former)FormerSanDiegan]

We did a rent-back agreement with the sellers for 10 days after buying our house. No issues. However, that period was short enough to not fall into the issue of being considered a rental property.
If you do a lease back, make sure you are covered as a landlord in terms of insurance, charge market rent, and have a definitive lease end date.
Also, get professional/legal help to review your lease agreement.

[Ribbles]

We are in this situation right now in Temecula, except we’re the renters. I don’t think you have a whole lot to be concerned with, considering they were owners and are buying a new house – i.e., on the surface it sounds like they’re responsible enough. In our case, we sold to a pair of Chinese retirees, all cash. We needed to rent for 45 days until our new construction is complete, and worked out all the terms in the contract (no deposit, 45 days rent in advance, with an option for more time at market rate if needed). They aren’t nitpicking us about anything (haven’t even heard from them or their pm since closing, in fact), which we really appreciate. Funny thing is, because we still have a bit of an attachment to the place, I’m the one worried about them taking care of it. “They do know they need to hire a gardener asap, right?” We’re taking the same good care of it we always have, and we’ll leave it spotless when we go.

[(former)FormerSanDiegan]

[quote=Ribbles]We are in this situation right now in Temecula, except we’re the renters. I don’t think you have a whole lot to be concerned with, considering they were owners and are buying a new house – i.e., on the surface it sounds like they’re responsible enough. In our case, we sold to a pair of Chinese retirees, all cash. We needed to rent for 45 days until our new construction is complete, and worked out all the terms in the contract (no deposit, 45 days rent in advance, with an option for more time at market rate if needed). They aren’t nitpicking us about anything (haven’t even heard from them or their pm since closing, in fact), which we really appreciate. Funny thing is, because we still have a bit of an attachment to the place, I’m the one worried about them taking care of it. “They do know they need to hire a gardener asap, right?” We’re taking the same good care of it we always have, and we’ll leave it spotless when we go.[/quote]

So your gardener is no longer caring for the property ?
Do the terms of the lease say that the tenant (you) are to care for the lawn or the landlord ?
Just an example of what should be in the agreement.

[Ribbles]

We are still paying our gardener to care for the property – doing them a favor, as they have helped make this go smoothly. We’ll stop upon moving out, which is in two weeks, and let the pm know.

It is a good example of what should be in the agreement.

[recordsclerk]

The list price is right on with current comps. This is probably the best location in the complex. West views (slight ocean/Coronado), least amount of neighbors possible, slight 125 noise. Rent back is not complicated or scary. No need for gardener with this property. Trash, water is paid by owner and not included in HOA. If you have the cash to buy this outright, I would buy something in the 500’s. You can do much better in that price range. We sold same condo in 2014 for 325K. Price spiked and piggybacked on our sales price which was the highest at that time. We never lived there, but I would say that amenities are top notch. Gym and pool are fantastic. Better than what we get in Eastlake Woods.

[Author]

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