Posted by Hannah Lapin ● Jul 21, 2020 9:00:00 AM

The Pros and Cons of Buying Tenant-Occupied Rentals

tenant pros and cons

For buy and hold investors, finding tenants can be tricky, but up and coming companies like Roofstock actually sell tenant-occupied rentals. This allows for the seamless transition of leases from one real estate investor to the next. If you are interested in this strategy, here are some pros and cons to consider:

Pros

  • Save time and money by not looking for a new tenant. Cubbi Home Property Management services says it can take up to six weeks to find and screen a new tenant. Every month vacant, investors must cover the utilities and mortgage without any income. Further, you can save money on marketing your property to new tenants. The Balance found that landlords often pay between $50 and a couple hundred dollars on advertisements or one-two months of rent on a realtor.
  • Get immediate rental income. When you close on tenanted-rental, you start getting the rental payments right after close.
  • Avoid any immediate in-between tenant tasks and expenses. In between tenants it is recommended that you clean all the carpets, windows, walls, etc. as well as replace the locks, air filters, and any batteries. You should also paint, check the landscaping and make sure all lights, outlets, water faucets and appliances are in working order. With tenants already in-place, you can manage move outs at a later date. Further, Buttonwood Residential Property Management said the cost of a single move out, i.e. tenant turnover, typically is over $1,000. 
 

Cons

  • You have to honor the lease terms even if you do not like them. According to NOLO, in the event of a change in landlord, most U.S. jurisdictions give tenants the right to remain on the property and keep the terms of their original lease until the lease end. It is essential to review all lease terms before purchasing the property.
  • You could inherit “problem tenants.” One way to avoid this is to review the tenant payment history and credit reports prior to purchasing the property.
  • If you need to evict a tenant, it can be difficult and costly. Landlordology found that the total costs of a formal eviction is over $5,000. Again, it is extremely important to do your due diligence before inheriting tenants.

 

If you decide to move forward, be sure to do your homework and due diligence to make sure the property is a good investment for you. See our blog post “Tips for Buying a Tenant-Occupied Rental" for additional guidance. 

If you are ready to purchase a tenant-occupied rental, check out RoofStock for high quality investments

To More Investor Resources

Related: Forbearance vs. Deferrals,  Rent Forbearance Programs- Develop a Plan

Topics: Landlording, Real Estate Investing, Property Management, Finding Properties