Posted by Hannah Lapin ● May 11, 2020 9:00:00 AM

Tips for Buying a Tenant-Occupied Rental

buy a house with tenants

Buying a tenant-occupied rental could be extremely beneficial to real estate investors, especially if the property has high-quality tenants. This will save you money on marketing and tenant screening, which can really add up. Plus, it will set you up for immediate rental income. However, we advise you to proceed with caution. Here are some tips to help you with due diligence when purchasing a tenant-occupied rental.

  1. Pre-screen the property, the lease, and the tenants thoroughly.

    Make sure you see the property before purchasing it to get an idea of how well the tenants upkeep the property. Then ask the owner for payment receipts and tenant credit reports to see their rent paying abilities. Also, be sure to get a history of complaints and maintenance requests. Finally, dive into the rental agreement to make sure it is sound and, most importantly, compliant.
  2. Run the numbers.

    Double check that the rent payment will be greater than the mortgage and expenses so that you will have monthly cash flow from the property.
  3. Ask the owner for the security deposit and documentation on any other agreements.

    The security deposit is important because if you don’t have it, you could end up having to front the money yourself at the end of the lease.
  4. Make sure you have the proper insurance coverage needed as a landlord.

    If you end up taking over a lease, you are going to need a landlord insurance policy that has added liability coverage.

For more guidance on buying a tenant-occupied rental, see this guide on confirming quality tenants from Avail. For guidance on how to sell a tenant-occupied rental, see our blog post “3 Creative Ways to Sell a Tenant-Occupied Rental.

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