How long can I rent back?

One of the questions I've been getting quite frequently from homeowners is the question: “If I do a rent back, what is it going to cost me? And how long can I do it for?” But before we answer those two questions, let's talk about basically what is a rent back. That is where you as a home seller sells your property, but you stay and live in it for a period of time as a tenant while your buyer becomes the landlord. So let's talk about what this will cost. Well it's important to understand that 80 to 85 percent of buyers in San Diego County are mostly utilizing loans in order to buy a property. And the thought process that we try to work around is that nobody's going to lose any money and nobody's going to make any money. So in essence, the buyer is going to have some carrying costs including their loan. Which includes principal and interest. They're going to have property taxes, insurance and sometimes HOA. So whatever those buyer carrying costs are typically becomes the rental amount from the seller. Which many times is higher than what their carrying costs were before they sold it because they bought it at a much lower price, but it's a convenience factor. Now what if you have a buyer who comes in all cash they're going to have less carrying costs. Well in those instances it just becomes a negotiating item in the process where we just sometimes do Market rental rate or sometimes it's a reduced rate on rental. It all just depends on the price that the buyer is offering.

Now let's talk about the timing of this. How long as a seller can you stay in the property? Well, again it's important to understand 80 to 85 percent of buyers are going to get a loan. And it's actually the buyer's lender that will dictate how soon the buyer has to move into their new home. 30 days or less, most lenders have no problem with that and will allow it. Fewer banks will allow a rent back in a time period of 45 days or so. And there are some banks out there that will actually allow rent back for a period of 60 days. But I really haven't come across any other banks that will extend it or go beyond 60 days. So you're looking at a limitation of about two months at most.

Now the next question or the other scenario is a buyer who comes across purchasing it all cash. In those instances they don't have any limitations and the buyer can extend rent back to you as long as you want. However, just understand that most buyers are going to want to move into their property relatively soon, maybe two to three months. You also have to understand sometimes I'll have sellers say well let's just find a cash buyer. If you do that, you're
reducing your buyer base and you may not get the best price for your home. So keeping those things in mind that relatively you might be able to do 30 to 45 days no problem, 60 days at the most. And the cost is usually going to be relatively what the buyer's new carrying costs are orr maybe Market rental rate.

If you have any more questions about a rent back I'm happy to go through a consultation with you and talk about other Solutions we have in regards to this.