Purchasing an Occupied Rental Property?

Purchasing an investment property with existing tenants in place is ideal. This means instant cash flow, no marketing or searching for the right renters to occupy your new property, and if the tenants have lived in the property long-term, you have a limited risk of the property becoming vacant in the near future — vacancies can be costly depending on the time of year! 

Whether your new tenants are currently on a month-to-month agreement or a termed lease, there are a few items you must keep in mind before closing on a renter occupied property to ensure the process runs smoothly. 

1. Ensure that tenant contact information is obtained from the seller during the sales process — In order to begin establishing a relationship with your tenants it is crucial that we have a way to contact them. Our initial introduction includes a welcome packet with instructions for activating their tenant portal and information about rent collection, maintenance requests and general office contact details. While contact information can be obtained after closing, it will delay the process of collecting rent, dispatching maintenance and processing renewals. 

2. Keys — Often times tenants change locks or have been living in the property for so long that the property management company simply does not have keys on file. It is strongly recommended to request keys from the seller prior to closing. However, One Stop Property Management will work on your behalf to obtain keys from the tenant if they are not provided. 

  3. Lease Agreements — this is obvious! Hopefully you were able to obtain a copy of the lease agreement during the sale process. This outlines the specific terms of the tenant’s occupancy such as rent amount, term and other provisions of living in the property. It is almost impossible to enforce verbal agreements after the property has changed ownership. An Estoppel Certificate can sometimes be obtained if no lease agreement exists. This is a document, signed by both parties, and details the terms of a lease agreement to the best knowledge of both parties. An estoppel certificate, generally, is not as detailed as a lease agreement but it can be useful in securing a rent amount and term with the tenant. 

Purchasing an occupied investment property is an exciting opportunity for investors who want to begin generating cash flow immediately. Before closing on a renter-occupied property be sure to consider the availability of tenant contact information, keys to access the property and the presence of a valid lease agreement. Check-in with One Stop Property Management for more advice on rental properties in your area.