There can be big benefits for investors in buying an already tenanted property. But don’t forget to consider both sides of this opportunity, as well as exploring the fine print and particulars.
One of the most difficult – and longer lasting – issues in landlord life is finding a great tenant. So, finding an already tenanted house is a big relief. A great way to begin an investment collection, a tenanted property can save you time and money. You’ll be enjoying cash in your pocket from day one of your purchase instead of advertising for new tenants and then watching time slip by while your bank account shrinks. As well, the house will be legally up and running to rent, with no immediate refurbishments needed. So, essentially, you can sit back, relax and feel chuffed about your great new investment. Or can you?
There’s always a chance the vendor wasn’t dotting all their i’s or crossing every t with this property. As a result, you may have to spend precious time and money fixing these issues. Then there’s your tenants. If you want to see new people move in, for any reason, you may not be able to do so quickly or easily. You may need to search more thoroughly for a conveyancer or solicitor as you want the legalities signed off by someone experienced in handling the purchase of tenanted properties.
Double-check your potential new home’s lease agreement. As real estate agents, we’re usually able to tell you this type of information, whether it’s a periodic or fixed-term lease, when the lease ends and any special conditions. A copy of the lease and similar information should be included in the vendor statement. Remember, for fixed-term agreements with a set expiry date, tenants can’t be forced out of the property. As such, you have to agree to the current rental contract. For periodic agreements, which are highly flexible for both landlords and tenants, you can request the property be vacated on a particular date. But you must still give the tenant a notice period of around 60 days, depending on where you live. As well, ask us more about the tenants. Do they pay their rent on time? Have they ever badly damaged the house? How long have they lived there? Are they keen to have their lease renewed? Again, we can often explain the tenant’s wishes; alternatively, just ask us. We encourage you to also research the neighbourhood and find out more about vacancy rates, rental values and similar.
Use your settlement period to transfer bond, tenancy, and rent details to your name as every cent of the rent will be paid to you as soon as settlement is complete. The current bond will stay in place but you will need to notify the relevant authorities of the change of ownership.