What you should know about buying a tenanted investment property
Buying a rental property is a popular way to invest. But where do you stand if the property you’re eyeing off already has a tenant? We’ll fill you in on what you need to know.
So you’re primed to expand your financial horizons and want to buy an investment property?
2023 may provide promise, with double-digit percentage gains for rental returns predicted in 11 out of the 14 major Australian residential markets.
But what happens if the property you want to buy already has tenants?
Depending on your plans, this could be a major boon. With tenants in place, the rental income can roll in from day dot!
But if you want to make changes to the property or the tenancy agreement … things get more complex.
So without further ado, here are the ins and outs of buying a tenanted investment property.
Know your tenants before buying an occupied property
Buying an occupied property can be a great way to start investing in real estate. You can start collecting rent right away, and you'll have a tenant who is already familiar with the property. However, there are some important things to consider before you buy an occupied property.
1. Learn about the tenants
The first step is to learn as much as you can about the current tenants. This includes their rental history, how well they take care of the property, and whether they're likely to stay long-term.
You can get this information from the seller, the property manager, or the tenants themselves. If the seller is unwilling to share this information, it's a red flag.
2. Inspect the property
Once you know something about the tenants, it's time to inspect the property. This includes checking for any damage, making sure the appliances are working, and inspecting the yard.
You should also ask the tenants if they have any outstanding maintenance requests. If they do, you'll need to factor this into your decision about whether to buy the property.
3. Understand your rights and obligations
As the landlord, you have certain rights and obligations. You're responsible for maintaining the property in good condition, and you're also responsible for paying for repairs.
However, you also have the right to collect rent, and you have the right to evict the tenants if they break the lease.
It's important to understand your rights and obligations before you buy an occupied property. You can find this information in your state or territory's rental laws.
4. Consider hiring a property manager
If you're not sure how to manage a tenancy, you may want to consider hiring a property manager. They can help you with everything from collecting rent to dealing with maintenance issues.
A good property manager can also help you find new tenants if the current tenants move out.
5. Make sure the property is a good investment
Finally, you need to make sure that the property is a good investment. This means that you need to factor in the cost of the property, the rent you'll be collecting, and the cost of repairs and maintenance.
You also need to consider the long-term potential of the property. If the property is in a good location, it's likely to appreciate in value over time.
Buying an occupied property can be a great way to start investing in real estate. However, it's important to do your research and understand the risks involved. By following these tips, you can increase your chances of making a successful investment.
Here are some additional tips for buying an occupied property:
Get a copy of the tenant's lease and review it carefully.
Meet with the tenant and get a feel for their personality and whether they're a good fit for you as a landlord.
Ask the tenant about their plans for the future. Do they plan to stay in the property for the long term, or are they thinking about moving?
Get an appraisal of the property to determine its fair market value.
Factor in the tenant's rent and other expenses when calculating your potential return on investment.
By following these tips, you can increase your chances of making a successful investment in an occupied property.
Here are some common mistakes to avoid when buying an occupied property:
Not doing your research. Before you buy an occupied property, it's important to do your research and understand the risks involved. This includes learning about the tenants, inspecting the property, and understanding your rights and obligations.
Not getting professional advice. If you're not sure how to buy an occupied property, it's a good idea to get professional advice from a real estate agent or a lawyer.
Not planning for the future. When you buy an occupied property, you need to plan for the future. This includes considering what will happen if the tenants move out, or if the property needs major repairs.
By avoiding these common mistakes, you can increase your chances of making a successful investment in an occupied property.
Get your pre-approval today!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.