Purchasing a home with tenants can be a risky proposition, but it doesn’t have to be a deal breaker. If you’re serious about buying the property and believe you can get past the potential hurdles associated with renting to tenants, there are ways for you to make it happen. With some careful consideration and strategic planning, you can buy a house with tenants and not get caught. These tips will help you handle the tenant-occupied home purchase with ease.
There are several key roles in the process of purchasing a house with tenants. The tenants are the ones who are paying the mortgage, after all. Therefore, you also have to have a lawyer who’s on your side, as well. Your lawyer will be required to counsel you about the risks of buying the property with tenants, and help you mitigate those risks by providing a non-disclosure agreement for tenants, among other things. You should also include the lawyer in your calls and meetings with the tenants. They should be a third party to the conversation and be able to fully advise you on the tenants’ obligations, as well as their expectations. The lawyer should also be able to offer you advice about how to protect your interests as a homeowner.
First and foremost, you need to be transparent with the tenants. You’re purchasing a house with tenants, after all, so you can’t hide the fact. You should let them know that you’re interested in the property and that you’re going to be putting an offer on it. You should let them know that you plan on living there once you close escrow. Be upfront about everything. The last thing you want is for them to find out about your plans after the fact, or worse, after you’ve moved in. You should be transparent about the process, as well. Let the tenants know that you’ll be having an inspection, and what the results of that inspection are. They need to be aware that you’re not just a cash buyer, and that you’re actually buying the property from them. You should also let the tenants know that you’ll be doing a walk-through and a final inspection, as well as what items you’ll be including in the transaction.
During the inspection period, be diligent about visiting the property. You want to be sure that the tenants are taking good care of the house. You should also be diligent about checking the property’s utilities and usage, especially if you’re buying the house with tenants. You don’t know if they’re going to be paying their bills or not, and you don’t know if they might have some kind of issue that could result in you having to foot the bill. Be diligent about speaking with the tenants about the inspection results. You don’t want to be dishonest about the findings of the inspection, but you also don’t want to be too critical of their home. You want to be professional and courteous, but you also want to make it clear that you expect the tenants to keep their home safe and in good condition.
If the tenants are still living in the house, put in place strict operating rules for the property. This can include things like no subletting, no paying guests, and no pets. You want to make it clear that this is your home now, and you want to keep it safe and sound. You don’t want to be too strict, but you don’t want to make it easy for the tenants to violate their lease, either. You also want to make it clear that you are the landlord, and not the tenants. This means that you control the utilities, like the water and power, as well as the landscaping and maintenance of the property. It also means that you decide who can and can’t visit the property, including the tenants themselves.
Once you’ve completed escrow and are in the final stages of purchasing the house with tenants, you should meet with them one last time. You should go over the closing documents, as well as the operating rules one last time. You should also let them know that they need to turn over their keys at some point during the process. If the tenants are good tenants, you don’t want to rush them out of the property. However, you also don’t want them to linger around, either. You want to be courteous, polite, and professional throughout the process. You might be surprised how many tenants will be happy to leave once the mortgage is paid off. There are others who might be upset or feel like they were pushed out of the property, but you can avoid those situations if you plan ahead and follow these tips.
There’s a lot that goes into buying a house with tenants. You have to be diligent about your research, you need to be transparent with the tenants, you have to be diligent about inspections, and you need to put in place strict operating rules for the property. If you follow these tips, though, you can buy a house with tenants and not get caught. You can enjoy the same benefits of homeownership without having to deal with a vacant property.
