Should You Purchase a Property with Existing Tenants?

When buying an investment property from another investor, the chances are high that the property will have current tenants. We are often asked if it is wise to purchase properties that already have tenants. For us, you need to investigate further before knowing if you are buying a headache. There are some negatives to existing tenants being in a property, here is what to look out for.

Purchase a Property with Property Managers Perth

Two Main Benefits

First of all, you won’t have to advertise the property to find a tenant. In addition, you know that the property will be producing revenue from the day you settle the sale. This will mean you don’t have to reach further into your pocket at the time when you are having to come up with stamp duty and settlement costs.

Also, a property with existing tenants automatically takes away a lot of the competition to buy it, because the majority of properties are still purchased by people who want to live in them. This lack of competition usually means that you will pay a lower price for an equivalent property that doesn’t have existing tenants.

Your Obligations to Existing Tenants

In many cases, your tenants will have the right to stay for the duration of their lease. Every state and territory requires that you honour the existing lease when purchasing a property. You also need to remember that in WA, you are required to now give 30 days notice if you are not renewing the lease. If the tenant is on periodic lease you are able to give 30 days notice to vacate once the property is sold.

Look at the records first

Every month we take over management of situations that can only be described as nightmares. Before you make an offer you need to check that there was a proper property condition report prepared before the tenants moved in, preferably with full colour photos to properly substantiate the condition. Also request to see a copy of their ledger, if they have been issued breaches and termination notices for non payment of rent or lack of cleanliness this should raise a red flag. You want to make sure that the current tenants are paying a rental price that is not only fair market value.

Property Management

A great property manager can help you handle the purchase so that you don’t leave anything out. Remember, you can appoint whatever manager you like once the property is yours, you don’t have to inherit theirs. If you want the best, call Investors Edge today: 1300 472 427.

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