How to buy the house you’re renting if you don’t want to let it go


Purchasing the home you are renting isn’t as uncommon as you might think. In many ways, a ‘try before you buy’ opportunity can be a great way to make sure you truly love a place before you enter into a mortgage.

Because it’s often a process that takes place behind the scenes, access to professional advice and anecdotal evidence surrounding the ‘rent to own’ scenario is often limited to not what you know, but who you know.

In the past three months, I’ve been approached by three renters asking me how to approach the homeowner to enquire about purchasing the property they’re living in, so I thought it’s about time we shine a spotlight on this form of property acquisition.

How to approach a homeowner to buy their property

If you are renting privately from the homeowner, you will already have their contact information, but what if you’re renting through an agency?

If the latter is the case, I would first advise approaching the real estate agent or property manager and ask whether they could pass on the owners’ contact information.

One of the best ways to approach the real estate agent is by showing how selling the home to you would be a win-win situation. Placing an offer directly to the homeowner is a win for both sides. It saves the owner marketing costs and drawing out the selling timeframe over multiple home opens, and as a renter, it saves you the time of searching for a home and avoiding a competitive bidding process.

Do your property research

Before you put in an offer for your rental, it’s important you carry out some research to have a thorough understanding of prices in the area.

Check what the median price was for properties recently sold in your local area on realestate.com.au or domain.com.au, or arrange a private valuation to gauge its worth (remembering that a property’s value doesn’t necessarily equate to the sale price).

Also take into account how quickly houses of a similar size and condition are selling in your suburb to get an idea of supply. If they're on the market for months or years, then you could be doing your homeowner a favour! If they’re moving fast, you might need to increase your offer.

Consider going to auctions to get a more thorough understanding of what prices people are willing to place on properties, in real-time. It also doesn’t hurt to look at historical data to help determine the overall market value.

If you really want to get an accurate price on the property, you could consider getting three separate appraisals of the home by different independent agents, so that you can work out what the average price point would be.

Carefully consider the pros and cons of buying the house

Before you jump in with both feet, take the time to consider the home you want to buy.
What are its positives and its downsides?

While you probably already have established good links within the community – your kids might even go to school locally – it’s good to consider whether you feel the property will grow in value over time.

Think of all scenarios – such as whether you’d be able to rent it if you were to move away, or if there are any new transport links being built nearby. If you plan to live in it long term, is there good healthcare nearby? Is it close to your work? Does it need termite barriers, new plumbing, or any other major maintenance expenses in the next year or two that you need to factor in?

If you feel the property needs renovating, then you can get tradies to visit and prepare you a quote on how much these repairs would cost, and then use them throughout the negotiating process when you make your offer.

Make sure you carry out adequate due diligence and try not to let emotion get in the way of making a decision. While you are saving the stress of the house hunting process (which takes on average 4.5 months in Australia!), you do want to make sure it is a suitable home for the long-term and purchasing property is not a decision to make lightly.

How to present an offer

You want to make sure you present your offer in the best way possible, as you don’t want the process to backfire and for the owners to list the house on the market.

Information is your friend, so go into the negotiating process armed with your research and offer to split the costs of independent valuations.

Demonstrate why you’ve come to the price you’ve landed on and use facts to prove it’s a fair price. Don’t forget to mention that selling to you, as a tenant, will save them real estate fees, time, stress, and the risk that they will be selling to someone who isn’t as in love with the home as you, or treat the property with the same respect as you do.

What price to offer

It can be difficult to know how much to offer your landlord, but keep in mind prices are steadily rising around Australia at the moment, and the market is fast moving with large buyer demand.

Following your research, and my above methods, I would suggest placing an offer within your highest price range, minus the 2% agent’s fee and a further $5,000 for marketing.

For example, if you feel the house is worth $800,000, minus the $16,000 commission and $5,000 marketing costs, and you could make an offer of $780,000 and explain how you arrived at this price.

Make sure the price is fair for both parties, because if you offer a price that’s too low, it’s easy for the owner to get an independent evaluation and realise you’re trying to low-ball them.

Make sure you’re ready to buy

Like with any property purchase, try and get your mortgage pre-approved so you’re ready to go. Speak to an independent mortgage broker and shop around to find the best deal.

Remember, the house you buy is just the start of the costs. Make sure you factor additional home owner costs into your budget as well, such as council and water rates, home insurance and strata fees. Also get a lawyer to review your sales contract to ensure you are legally protected during the sales process.

Tips for negotiating

Be prepared to negotiate on price and have your research ready to back you up. When negotiating, use the words ‘value’ rather than ‘budget’ to show you are talking about what you feel the home is worth, rather than how much money you have to spend.

If you tell the owner your offer is ‘X’ because you can't afford to pay more, then you run the risk of them thinking you are not the right buyer for the property.

Instead, use language such as, “I offered ‘X’ because I only see value to that level, based on my research…” This is a powerful way to hold your line on price and make it about their property, rather than your budget.

Any questions on the buying process?

If you’ve found this article interesting and would like to learn more, don’t hesitate to contact me with any questions you might have.

I work with buyers nationally who locate their own properties before engaging me to ensure they secure the home on the best terms.

I also work with sellers to make sure they choose the right agent for their needs, negotiating on their behalf to reduce their selling costs and ensure they sell for the highest price.

In a nutshell, I help buyers cut out the nonsense to make good property decisions and buy below the targeted price! Let’s chat more about transitioning out from renter to becoming an owner occupier.


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