Property with a rent paying tenant is an investors dream, but you may have just stumbled upon your dream home and later find out that its occupied what happens now?
Being a Realtor you come across many homes that may fit the needs of your clients or need some work but have good potential and at a great price point,you know your clients would like. Sometimes these homes are rented,but did not fall of the rental category,since they weren’t initally rental property,but I will notice in the comments the property is currently leased and sometimes it will be a newly signed lease ending a whole year from time of listing (wow). I am very hesitant to show a client a house I think they will like,but that’s currently rented,unless the client is an investor and of course open to this. Many people are unaware of this,but the lease agreement does stay in place until whatever time has been noted. It can be a lengthy process for eviction and tenants have rights. Usually I come across this when a home has been on the market for a long time and sellers want out.
I normally would not want to deal with this situation unless a client truly loves the property and understands the entire situation and the responsibilities from becoming a home-owner to now also becoming a landlord. Here are some tips when handling these tricky situations, it may be worth if or maybe not you decide.
Thinking about buying a home currently occupied by tenants
- Ask the agent about getting a copy of the lease before making an offer (This is important if you are really very interested in the property, to see the terms,rent amount,security deposit,and any other things the seller has promised or included to do for the tenants, These things you could be responsible for and may have an impact on your decision to purchase the property. There may also be a termination clause in the lease that may be beneficial if you wanting to occupy the property sooner than the lease end.)
- If you want to move forward with the purchase you and your Realtor should research the tenants credit and payment history.
- You also want to have your agent write in amendment in your contract that keeps you in constant communication between seller and tenant, so that you are informed with anything that is taken place (such as late payments,rent changes and etc).
- You should also make sure the security deposit gets transferred to you at the end of sale
A great tip from ziprealty is:
If you can stand it, you should meet with the seller and the tenant together before closing. Rent, rent collection methods, the security deposit, date of tenant’s move out, and any changes you want to make to the agreement should be clear to everyone, agreed on. Consider a new lease the tenant signs with you in the seller’s presence.
Remember: In real estate everything is negotiable if you are trying to move in right away, maybe you can offer to pay some concessions (offer to pay moving expenses,security deposit for new place) to the tenant for them to leave, but ultimately the lease usually follows with the sale and tenants have rights also.
It may be the home of your dreams but being responsible for a tenant can be a lot more than the average home buyer is looking for. In the end you may just not be able to part and move forward with the purchase, but it may be worth it to move on to another property. No one can determine how things will work out once you are the new landlord.
Always consult with an attorney for legalities between landlord and tenants. Know your rights and the rights of your tenant.