The Florida coastline is chocked full of vacation homes, rentals, and beautiful estates perfect for the short term vacation rental or long term. Because of that, we sell a lot of homes and property to investors and real estate owners that want to rent out their home. But, it can be a tricky scenario selling a house that already has a tenant in it. So what are the logistics? How can it be done? And how to buy a house with tenants? While most investors prefer to screen the tenants and set their own terms and conditions in the lease agreement if you buy a home with existing tenants you have to commit to the current lease agreement until it ends. Here are a few important things to know when buying a tenant-occupied property.
Understand the rights of the tenants.
This is a crucial point in buying a tenant-occupied property. There are guidelines that need to be followed when visiting and viewing the property. You must give ample notice to tenants if you’re not planning to renew their lease. Tenants should be given 60 to 120 days of written notice that the lease is being terminated if such. You’ll also want to give the tenants prior notice if you’re planning on changing the terms of the agreement.
Understand the existing lease agreement remains.
The sale of a rental property to a new owner does not make the existing lease agreement disappear. Leases are tied to the property and not the owner so the new homeowner will be bound to the existing agreement until the end of the terms. You may not raise the rent, modify the agreement, or terminate the lease until the terms of the current lease are completed.
Understand your obligations.
As the new owner, you are taking up the role of a landlord so you should be aware of the obligations and responsibilities that go along with that. This can vary depending on what was stated in the original lease agreement. You are responsible, however, to provide a safe and habitable environment for the tenants. Other landlord obligations include providing the tenants with access to running water, heat, trash removal, and performing regular maintenance of the HVAC system is if necessary.
What if you’re buying the house as a primary residence?
If you’re wanting to buy a house and use it for your primary residence but it still has tenants is the challenge of evicting those tenants. Again, the lease agreement remains legal even with the change of ownership so you’ll need to wait until the lease ends before you can evict the tenants and move-in. There are some exceptions to this rule, however. If the lease agreement specifies that the owner has the right to terminate the lease upon selling the property, if the property is a foreclosure, or you have specified in the offer that you want to buy the property should be vacant upon closing. This is now the seller’s responsibility to negotiate with the existing tenants. However, all of these stipulations must be in writing and agreed upon or in the original lease agreement.
There are several benefits to buying a house with tenants.
If you acquire a house with tenants you’ll have an immediate cash flow to generate income. You may not have to shell out extra money to improve the house as it is already furnished and rented. You won’t need to spend money to market the property to prospective tenants and you probably won’t have to wait for months to find renters. A tenant occupied property means it meets all the legal requirements to be rented including health and safety requirements, which is a big plus.
Of course, with those benefits, some downsides as well, which I believe we already covered but those include not being able to screen the tenants, dealing with problematic tenants, not being able to change the terms and conditions, or legal risk if there’s a possibility that the property may not be in compliance with certain laws.
Here along the Gulf Coast of Florida, we have many different vacation options and rental investments to choose from, with or without tenants. Contact our agents today to specifically discuss purchasing a rental investment property on the Gulf Coast.