Most people think of buying a home for them to move into. This is paramount when choosing the location and helps to build the excitement of the purchase. But, if you are interested in investment opportunities you may want to purchase a property to rent out.
In fact, you can go one step better than this and purchase a property that already has tenants. This will give you an instant income but, you need to be aware of certain clauses.
You should note that if you decide to purchase a property from a real estate auctioneer they must inform you if there are already tenants in the property. This will help you to prepare for them. Taking a property empty is standard practice in real estate transactions, your lawyer will verify this is the case when creating the sale contract.
Know The Rental Agreement
If the property has tenants there will be an existing rental agreement. Study this carefully as it will tell you what the tenant needs to do, how long they have been there, the rent amount, and how long the agreement lasts for.
If you take on a property with tenants then you will need to honor the existing agreement. You cannot make the tenants to leave until the existing agreement expires.
However, it is possible to ask them and come to a mutual agreement. But, they are under no obligation to leave.
As a buyer, you will be entitled to the tenant payment history. This will tell you if they pay their rent on time and any other relevant information, including the amount of the current rent.
You will be able to compare this to current market values to confirm whether it is fair or not.
This is all useful information if you intend to continue renting the property and can help you offer a new lease to the tenants, giving them and your security.
You are probably aware that a tenant will have put funds down before they move in, this covers damages to the property. This bond can be transferred into your name, allowing you to authorize the return of the funds when the time is right.
As a landlord you will be responsible for ensuring the property is up to code, has enough smoke alarms, and that all appliances are in good working order. To eliminate unexpected bills and issues you should have all the appliances inspected and serviced before you complete the sale.
It can help you renegotiate the price if you find an array of issues. In addition, it will prevent any nasty and costly surprises after the purchase.
It Is Not Always perfect
Even if you are looking for a property with tenants you must be aware that there can be damage issues and not paying the rent. This will leave you with the expense of having to evict them and tidy the damage. While you hope that this doesn’t happen, it is important to be prepared for the worst, just in case.