There are several things to weigh when considering buying a home that the owner didn’t occupy.
The reasons may be fairly innocuous, such as the owner became burned out from managing the property as a rental, dealing with the off-hour phone calls, and responding to tenant demands.
The owner might be moving or perhaps the market has risen, and now seems like the right time to cash in.
Sometimes the issue is cash flow. If a tenant hasn’t paid the rent, the owner may struggle to cover the mortgage. Sometimes the owner cannot afford to make the repairs the house requires.
If the owner has rented out the house for many years, he or she might not have any depreciation left for a tax deduction and could be eager to do a 1031 Exchange for another property. Taking its name from Section 1031 of the Internal Revenue Code, a 1031 allows a taxpayer to sell income, investment, or business property and replace it with a “like-kind” property, without having to pay capital gains taxes.
Why does the reasoning matter? Because it could indicate how well the property was cared for and whether or not the owner is motivated and willing to negotiate.
A cash-strapped owner may be less inclined to maintain the property. And since the owner hasn’t lived there, he or she may not even be aware of any problems. Read more.