BUY and rent to last owner?

I know its not good to lease back to the last owner but if you got a good deal on a property can you rent it back to the owner without complications?
thanks TOmmy


It is generally not a good idea to leave the previous owner in the property after you purchase it, no matter whether you rent it to them or lease it to them. The reason that this is not a good idea is two-fold. The previous owner could not or did not make the payments prior to you purchasing the property, so why should they be able to make rent payments to you. Also, if the previous owner feels that you got a good deal on the purchase, they may decide that you should get less rent because you “owe” them.

Now, with that being said, I have a property that I bought from a friend that I now rent to her. My unwritten agreement with her was that I would purchase the property (at substantially less than market value), pay the back taxes on the property, fix the problems with the house, and rent it back to her for less than she was paying for her mortgage. I could do this because I have good credit and could get better financing on the property, plus the property is large enough that I can add 3 additional single family rental units to the property and turn a slight negative cash flow into a gold mine. She is happy because she likes the area and she can be proud of her home when she has friends come over. I am happy because I have a property has over 60 percent equity and soon will begin showing a positive cash flow and will be paid for in a little over 14 years.


I think renting to a former owner is usually a bad idea, especially if the former owner was losing the property to forclosure or the like. They WILL resent you. They WILL treat you the way they did the last creditor (the one they didn’t pay). And they WILL claim that you took advantage of them in a bad moment of duress and some idiot judge or attorney general funded by your tax dollars WILL lend them a sympathetic ear. I’ve some exceptions to the rule, for example with elderly sellers who live rent free for life and didn’t really need to sell, at least not due to foreclousre or the like. But those are the exceptions, in my view.

John Hyre