8 tips for buying your rental property from the landlord
It can be tempting to buy your rental from your landlord. However, you may need to be more diligent than if you were buying a traditional property. Here's what I'd do.
Yet it can also be a costly mistake. After closing plenty of landlord-tenant transactions, here's how I'd approach the idea:
1. Start with this question
If you weren't already living here, would you still want to buy this property?
Sometimes familiarity makes a property feel like the obvious choice when, objectively, it may not be. Convenience is nice. Long-term fit can matter even more.
2. Know what you can actually afford
Before you negotiate anything, understand your real budget, which includes more than a mortgage payment.
You'll want to factor in:2. Know what you can actually afford
Before you negotiate anything, understand your real budget, which includes more than a mortgage payment.
- Property taxes
- Homeowners insurance
- HOA or condo assessments
- Utilities you may not currently pay
- Maintenance and repairs
- Lender closing costs
3. Get mortgage preapproval early
If you need financing, talk to a lender before negotiating. Preapproval helps you understand exactly what you can afford and puts you in a stronger position if/when the conversation becomes serious.
If financing isn't going to work for you, it's better to know that early in the process.
4. Make sure the price makes sense
Just because your landlord offers you a number doesn't mean it reflects market value.
Look at comparable listings and sales in the neighborhood to understand what similar properties are actually selling for.
Plus, there may be room for negotiation. The landlord may be saving money by avoiding commissions, marketing, staging, and listing costs.
But you still need to verify the big numbers.
5. Get a professional home inspection
Don't assume you know the property because you live there. A home inspection can uncover issues and problems you may never notice as a renter, such as:
- Plumbing
- Electrical
- Moisture
- Structural
- HVAC
- Roofing
6. If it's a condo, get to know the condo homeowners association (HOA)
In a condominium, you're not just buying the unit. You're buying into the HOA. As a renter, you might not know much about what it does or doesn't do, current and future projects, and what it can or can't afford to do.
As part of the closing process, you will be able to review the HOA's:
- Association financials
- Reserve levels
- Pending special assessments
- Litigation
- Building rules and restrictions
- Maintenance responsibilities
7. Talk through the details
These transactions sometimes offer flexibility you won't find elsewhere. But it's good to set your expectations in advance.
Questions to ask your landlord/seller:
- What is the expected earnest money deposit?
- Will the landlord credit your security deposit?
- When does the landlord want to close?
- Would owner financing be an option?
- Is rent-to-own part of the discussion?
8. Hire an experienced real estate attorney early on
Even if you know your landlord, this is still a binding legal transaction that impacts your life and future.
Contracts matter. Deadlines matter. Contingencies matter. Having a legal guide to help protect your interests, explain legalities, and even negotiate on your behalf can help make your purchase faster, easier, and less stressful.
Final thoughts
Buying from your landlord can be a great opportunity. But the best deals are built on due diligence, good numbers, and clear legal guidance.
If you're thinking about buying your rental property in the Chicago area, my team and I would be happy to help you evaluate the opportunity before you commit.
To learn more, read FAQs for tenants who want to buy their rental.
Feel free to schedule a call with me, Mike. My firm has closed thousands of real estate purchases in the Chicago area. I'd be happy to talk to you about buying from your landlord.
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