If you’re a real estate investor, purchasing a property that already has tenants may not be something you’ve considered in the past. It’s true that the process does come with some unique risks. But there are risks with all investments, and you may not want to write off the idea of purchasing a property with tenants in it already. You just have to know what to expect. Here are the best options for buying a tenant-occupied rental, whether you’d like to get rid of the existing tenants or keep them.
Legal Options for Removing the Tenants
Being the new owner of a property does not override the existing tenant’s lease. Even though they signed the lease with a different property owner, the new property owner isn’t allowed to break the lease. However, if the lease the tenant signs explicitly states that the lease may be terminated if the property transfers ownership, you will have that option. Basically, the terms of the lease are supreme over everything. Whatever the lease states can happen, can happen.
Existing Lease Terms
If no such clause exists in the tenant’s current lease and you’d still like to purchase the property but don’t want the tenants, you still have options. When you submit an offer to the current owner, simply make it contingent on the current tenants leaving. Of course, there’s no guarantee that this will work. But you are putting the responsibility of tenant removal on the current owner, which does remove some of the stress from the situation.
Working with the Current Owner
If you’re unable to get the current owner to break the lease, you can still purchase the property and attempt to get the current tenants to leave. You’ll probably have to incentivize them with cash since they legally have a right to remain in the property. Again, there’s no guarantee this will work so you have to be prepared to manage the property with the current tenants remaining if they refuse your offer.
The Best Way to Keep the Existing Tenants
If you have exhausted all your options and the tenants want to stay, you can make that work. Buying a tenant-occupied rental definitely isn’t all bad. For example, if your plan was to rent out the property anyway, you won’t have to worry about advertising or making any updates or repairs right off the bat. Your cash flow from the property will be instant!
Building Great Tenant Relationships
To foster a good relationship with your new tenants from the start, go out of your way to introduce yourself. This can be in the form of an email or letter. Let the tenants know about any changes you might be making to how their rent will be collected or how maintenance requests should be made to avoid any conflicts.
Items to be Aware of
One of the most important things you can do to make your transition to becoming a landlord seamless is to ensure the previous owner and the tenants sign an estoppel agreement. This document essentially gets everyone on the same page about the rights and responsibilities of the tenants and the landlord. It protects everyone involved. The former owner will also need to transfer the tenant’s security deposit to you. By following all of these tips, you’ll be setting yourself up for a successful landlord-tenant relationship!
Simplify Real Estate Investing with an Ocala Property Manager
If you would like to purchase a property that has tenants in it currently but you don’t want the headaches that come with managing those tenants, Resolute Property Management can help! We offer the finest rental property management services throughout Marion County. You can reap the rewards of being a real estate investor without the hassle of managing residents.
To learn more about working with an Ocala property manager, schedule a call with Resolute today!