What to know about buying the house you are renting

If you’re trying to get into the real estate market, it can be tempting to bypass research and make an offer on the house or apartment you’re already renting.

It may even seem practical – you know the house, the neighbors and the area.

Sometimes buying the property you’re renting can be as simple as a regular purchase, minus the move.

But with house prices soaring, that’s unlikely to be an easy option. A mortgage broker and a real estate expert explain what this entails.

What are your options if the property is not on the market?

If your rental isn’t for sale, Rebecca Jarrett-Dalton, a Western Sydney-based mortgage broker, says there’s only one way to go about it.

“Approach the owner and see if he’s ready to sell,” she says.

However, she points out that the tenant will have very little bargaining power “because the landlord knows you want it.”

Moreover, there is no obligation for the owner to sell, she adds. “So it’s just if the timing suits them.”

As with any property on the market, if the seller is interested in your offer, you are likely to enter into a negotiation before agreeing on the final price.

When considering property value, Ms. Jarrett-Dalton advises looking at comparable sales in the area.

Timothy McKibbin, CEO of the Real Estate Institute of New South Wales, said: “Value is not a science, it’s more of an art.”

Buying in a boiling real estate market can make it even more difficult.

Expect competition, even if your rental is for sale

While it doesn’t hurt to ask if your rental is for sale, McKibbin says the landlord is unlikely to want to sell their investment property unless it’s already their plan.

“Landlords make these investments in order to achieve capital growth and also benefit from a stream of income in the form of rent,” he says.

Even if the owner intends to sell, he explains that it is rare for a landlord to approach the tenant in the first place.

While that may sound convenient, he says owners would likely benefit financially from making their property more widely available for sale.

If the property you are renting is on the market, you may be able to get a head start on the buying process if you hear from the inside that the landlord is about to sell.

Other ways to stay in the area

If you know you’d like to buy in your neighborhood, Ms. Jarrett-Dalton suggests looking at other properties for sale in your area, and even a mailbox by dropping a note on the streets where you want to live.

“It’s amazing how many people are thinking about selling and may be tempted by the current market.”

This article contains general information only. You should consider obtaining independent professional advice based on your particular circumstances.

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