Purchasing a Chatham County rental property with existing tenants may seem like an ideal situation. After all, the chance to skip renovating the rental home, advertising, and screening tenants sounds great. However, obtaining a property that is already leased includes some advantages but also a few hindrances. To effectively purchase a property with existing tenants, it’s critical to learn everything about the process and what to evade.
The instant cash flows and turnkey nature of buying a leased property may make it seem like a great option for your next investment property. But it’s important not to assume that just because a property is leased, it is in good condition or that the tenants are responsible and punctual with rent payments. Rather, do your due diligence to ensure that leased property is a good investment.
One of the main things you should comprehend when considering a leased property is the current lease agreement. When you purchase a property occupied by tenants, you right away inherit the lease agreement they signed with their old landlord. Since the lease is a binding contract, you should be comfortable living by the terms of that lease until it ends or comes up for renewal. In a few situations, the tenant may have consented to terminate their lease upon the property’s sale, but that is not a typical scenario. Most of the time, you need to know what prior agreements govern your new investment.
Other than examining the existing lease documents, it’s vital to screen the current tenants carefully before buying the property. Treat the situation as if the tenants were applying for a new application, running thorough background and credit checks on them and verifying their payment history and references. Moreover, verify with the current owner or landlord that the tenant has paid a security deposit and that it is duly secured in a separate bank account.
Together with screening your tenants, it’s important to do a thorough evaluation of the property as well. To get a full sense of the property’s current condition, you will need to see the house’s condition and yard in person. With tenants already residing in the property, it’s essential to know how conscientious they are about keeping the property clean and maintained. Also, be sure to ask the current owner about any current or past insurance claims, especially if they are tenant-caused. Too many insurance claims might make it problematic for you to ensure the property after the sale.
If everything works out in a good way, you may have found an excellent, tenant-occupied rental property. But it makes no difference if your new Chatham County investment already has tenants or not; you’ll need to be prepared to make and keep the property in habitable condition, make sure that the electrical and plumbing systems are safe and working correctly, and that the structures are sound. Even though your new rental property may include tenants already living there, the moment the sale is final, you are fully responsible for managing and maintaining the property from that point on.
Property management can be a challenging task, mainly if you are doing it yourself. Ideally, why not assign the day-to-day tasks over to professionals? For more information about the property management services in Chatham County, contact us today or call us at 919-439-8989.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.