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.
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.
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.
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.
Make sure you have the proper insurance coverage needed as a landlord.
Disclaimer: The information in this blog has been prepared solely for informational purposes. The contents are based upon or derived from information generally believed to be reliable although Visio Lending accepts no liability with regard to the user's reliance on it. For legal advice, please contact your counsel.