Purchasing a Home with Tenants
You have been wishing for the home down the street to be up for sale. Today, your dream has come true as the owners have decided to place the property on the local real estate listings. The home has everything that you always wanted, from having the right amount of space to wonderful curb appeal. There is just one catch: the previous owner was using the house as an investment property and renting it out to tenants.
So, when you go to the showing to imagine what the home will look like with all of your furnishings inside, you discover the tenants eyeing you with worry on their faces and with not one possession inside a moving box.
Buying a Home with Existing Tenants
If you are purchasing a home that has existing tenants and you wish to turn it into an investment rental property, then the situation may be a bit easier to handle. The lease merely transfers over to you as you collect rental payments and handle maintenance requests. If the house has been separated into two living quarters with shared common rooms, such as the tenant living in a completed basement or upper floor, you could still move into the other vacant spaces while gaining that passive income stream.
However, you may not be interested in sharing a new home with strangers. In these situations, you may not be able tell the tenant to leave after you close the deal. Their lease is often a binding contract that stays in place even when the house keys exchange hands. So, if they still have time left on the lease and don’t have any intention to move out on their own, you may not be able to force them to move out on that first day or move any of their belongings outside of the house.
Yet you do have several options that may be appealing for all parties involved. Check out the following tips and decide on the best one based on your particular circumstances.
Have the Previous Homeowner Deal with the Tenants
You may be able to make it a contingency in your offer to purchase the property that the current owner must make the home vacant before the closing transaction takes place. This takes the burden, both mentally and financially, off your shoulders. Then the current homeowner can decide how they want to break the lease or whether they want to offer to buy out the lease.
Purchase the Home and Cancel the Lease, if Possible
You can go ahead with buying the house with the existing tenants and then canceling the lease agreement. This situation works well if the tenants are on a month-to-month lease. Laws permitting, you can give the tenants proper notice to leave the property. If they remain after that time, then you can proceed with the eviction process.
Offer a Lease Buyout
If you are in a hurry for the tenants to move out, or they have a longer lease agreement, then you can offer to buy out their lease. This monetary incentive is a way to help the tenants move into a new place and cover all their inconveniences. Any buyout payment arrangement you make with the tenants should be placed into writing to ensure there are no later disagreements.
Before looking at homes, it is in your best interest to decide whether you want to deal with the hassles of buying rental property and turning it into a permanent residence. If you don’t have the time or extra budget, you may decide to just pass on the home and seek other properties that are available and are already vacant.