My great Rent to Own couple (tenants) split up?

[CraigSmith]

I have great RTO tenants who were a couple but have recently split up. (She) is living in the house in BC and (he) runs a company in Alberta and (he) is also the strength of the deal. (He) has good credit and money but just loved the house so went through with the Rent to Own so I could build up more equity from mortgage paydown. Since being in the place, they have put their own money into new floors, trim and baseboard. They put up a $9000 deposit and have never missed an option or rent payment. They are easy going and easy to deal with. However, now that they have split up, (she) has a new boyfriend that moved into the house with her and now her ex wants out of the deal and the new boyfriend wants in. Another problem is, they are asking for another year extension to make it work. It is not making me feel all warm and fuzzy inside. Any suggestions? Has anyone dealt with this before?

Thanks

Craig

 

[Thomas Beyer]

Two ways to play it: nice or not nice.

Nice: offer them a contract amendment and/or extension that works for you and them. That may include a higher price and/or rent, and/or option deposit, after you have checked them out like a new applicant. Are they a couple that will likely be able to buy the asset in a year or 3 i.e. get a new mortgage ?

Not nice: tell them that they lose their deposit and will have to exit the house.

I suggest that you negotiate the nice path first, assuming that you are comfortable with the numbers and their quality of this new couple.

Consider what other options exist if they exit. These options may, or may not, be better.

 

[Sherilynn]

The big question: do the occupants (new boyfriend + original girlfriend) qualify for your program? If they have no chance of buying the house, then there is no point extending.

In my company, any extension means the numbers get reworked. Translation: higher final purchase price and possibly higher rent (depending on current market rent and whether costs have increased).

If the new couple qualifies and is willing to commit to the higher rent and price, then why not renew?

You only have the luxury of judging based on warm fuzzies before you start the deal. Once tenants are in the property, you must make every reasonable effort to make the deal work and help them successfully buy the property.