let’s talk : EARLY OCCUPANCY AGREEMENTS
LTRE is almost ALWAYS real time. So here is what is going on in real life. We have a SFR under contract up in NY that we are looking to renovate and rent out. Closing was supposed to happen over a week ago and still has not but we NEED to get started on the renovations for an upcoming lease SO we negotiated a pre-occupancy agreement. To be honest, this was my first one and I felt a bit nervous about it BUT we are in a bind. So let’s talk about them.
So, as we do, let’s talk Real Estate, let’s talk PRE-OCCUPANCY AGREEMENTS…
WHAT IS A PRE-OCCUPANCY AGREEMENT?
An early occupancy agreement is an agreement to that allows the buyer to rent the home they are going to buy before they actually close on the purchase.
WHAT ARE THE PROS?
– If you are the buyer, and you need to move ASAP this is the faster and cheaper route for you. You are going to move into this house eventually?! This is a quicker and more affordable option than finding a temporary short term rental until closing.
– If you are the seller, and your property is vacant, this is a way to earn a little extra money while the property sits empty.
WHAT ARE THE CONS?
– If you are the buyer, you will have to pay rent.
– If you are the seller, and the deal falls through, you now have to deal with getting the buyer out of your property.
WHY DID WE DO THIS?
This is a house we are purchasing to fix up and rent out. We had expected to close on this last week, and already have a lease signed with new tenants to start 4/1. It is not 3/3 and we have no firm closing date in site. BUT, we know we will close on this. Even if for some reason the loan fell through, we have enough cash as a group to push this deal over the finish line if we really needed to. We needed to get in there and start the renovations so that we could honor our lease coming up.
HOW DID WE STRUCTURE OUR AGREEMENT?
$30/day in rent
We take over utilities, taxes and insurance.
If we back out of the deal, for some unbeknownst reason, we owe to the seller to deliver the property back in the same condition.
If the seller decides to back out of the deal before closing, he has to reimburse us to the improvements we made to the house.
I believe the seller agreed to this because he has faith that we will close on this deal, and he also knows that this property does need a fair amount of work.
Honestly, overall, I think these agreements are super risky BUT in we do plan to close within a week of this agreement commencement date so we are hoping we are good to go! Have you ever done an early occupancy agreement? What are your thoughts on them?!