Acquiring a St. Charles rental property with existing tenants may appear to be an ideal situation. Aside from that, the possibility to skip renovating the rental home, advertising, and screening tenants is quite impressive. However, acquiring a property that is already leased includes some bonuses but also a few challenges. To efficiently purchase a property with existing tenants, you first need to learn as much as you can about the procedure and what to avoid.
The instant cash flows and turnkey nature of buying a leased property may seem like the best choice for your next investment property. But since the property is leased, it should not be assumed that it is in good condition or that the tenants are responsible and punctual with rent payments. Preferably, do your due diligence to ensure that leased property is a good investment.
Perhaps the main thing you need to check when considering a leased property is the current lease agreement. When you acquire a property occupied by tenants, you commonly inherit the lease agreement they signed with their recent landlord. Since the lease is a binding contract, you will need to be comfortable living by the terms of that lease until it ends or comes up for renewal. Sometimes, the tenant has decided to terminate their lease upon the property’s sale, but that is not a usual scenario. Mostly, you need to know what prior agreements govern your new investment.
Apart from examining the existing lease documents, it’s essential to screen the current tenants carefully before getting the property. Treat the situation as if the tenants were applying for the first time, running thorough background and credit checks on them and verifying their payment history and references. In addition, verify with the current owner or landlord that the tenant has paid a security deposit and that it is properly deposited in a separate bank account.
Besides screening your tenants, it’s advisable to do a thorough evaluation of the property as well. To get a full sense of the property’s current condition, it is important to see the house’s condition and yard in person. With tenants already existing in the property, it’s critical to know how responsible they are about keeping the property clean and maintained. Additionally, be sure to ask the current owner about any current or past insurance claims, mainly if they are tenant-caused. Too many insurance claims might make it difficult for you to ensure the property after the sale.
If everything is approved, you may have spotted an outstanding, tenant-occupied rental property. But it doesn’t matter whether your new St. Charles investment already has tenants or not; you’ll need to be ready to get and keep the property in habitable condition, inspect if the electrical and plumbing systems are safe and working correctly and that the structures are sound. While your new rental property may include tenants already staying there, after the sale is finished, you are fully responsible for managing and maintaining the property from that point on.
Property management can be a very involved task, especially if you are doing it yourself. Instead, why not turn the day-to-day tasks over to professionals? For more information about the property management services in St. Charles, contact us today or call us at 636-542-8852.
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