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Buying a Rental Property with Tenants

July 24th, 2014.

Topics: Landlord Advice
 
When purchasing a rental property should you keep the existing Tenant on? This is a really good question and often in our experience the answer can be yes so long as the right process is followed.

Regardless of whether you intend to retain the Tenant or not, ALWAYS ensure that vacant possession is stipulated on the S&P Agreement before going unconditional. (See more on this below).  In addition to the benefits outlined below this also allows you to go unconditional without having to wait for all of the below checks to be completed. Worst case if the Tenant doesn’t check out, you will then simply have a vacant property that is all ready to be rented to its next Tenant.
Always treat the process like you would if you had a vacant property and follow the below steps:
 
  1. Get the Tenant to complete an application form and complete the necessary reference checks
  2. Get a list of all occupants and copies of their ID’s
  3. Credit check the named persons on the application
  4. Ask the Vendor do they pay their rent on time and have there been any issues with the Tenancy
  5. When at the open home have a look around and see how the Tenants are taking care of the property
Once you are satisfied that this is the right Tenant to help you get the best return on your new investment and that allowing these Tenants to stay rather than sourcing new ones is the best course of action, then you can proceed to offering them a Tenancy.
 

Purchase with Vacant Possession when Retaining the Tenant

Purchasing with vacant possession will enable you to set in place your own Tenancy Agreement with the existing Tenant and ensure that any terms of the previous agreement do not end up your problem. In the eyes of the Tenancy Tribunal if you do not purchase with vacant possession regardless of whether you get the Tenant to sign a new agreement, the original Tenancy Agreement will be the only agreement they will observe in a dispute.  

Ensuring that the previous Owners Tenancy Agreement is properly wound up prior to you settling provides multiple benefits including:
 
  1. Being able to set a higher weekly rental amount from the day you settle
  2. Ensuring that water can be on charged to the Tenant
  3. Ensuring that the lawns and weeds are the Tenants responsibility   
  4. Ensuring that a full 4 week bond will be taken
  5. Ensuring that any rent arrears or other debts at the time of settlement are not your issue
The only two downsides to taking a Tenancy in this way are that you will need to ensure that the bond and first weeks rent is paid immediately upon signing the new Tenancy Agreement as more often than not when settlement day comes around the previous Owner has weeks ago, normally when the contract went unconditional, got the Tenant to sign over the entire Bond to them for rent arrears and damages, so don’t rely on a Bond Transfer being done. The second pitfall is that because the property is not vacant it is hard to undertake a thorough entry inspection prior to the Tenancy commencing, take a set of date stamped photos and if there are obvious damages to the property discuss these with the Tenant and get them to take responsibility for these in writing.

If you are in the process of purchasing a new property and would like some free advice on whether to retain the existing Tenants or not, contact us now on (09) 476 3433.

2 Comments

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LINK 6
wdsw says ...
Si vous souhaitez rencontrer des clients demain, vous devez planifier votre lieu de rencontre avec vos clients dès aujourd'hui.Heure spécifique. Concevoir un lieu de rencontre avec vos clients peut vous faire gagner du temps sur la route. Si vous êtes toujours à l'affût, certains raccourcis peuvent également vous apporter des opportunités inattendues. tag heuer replique Les personnes qui ne peuvent pas contrôler efficacement leur temps se plaignent souvent de ne pas avoir le temps de planifier leur temps. Mais si vous ne pouvez pas planifier votre temps efficacement et vous améliorer, vous ne serez peut-être qu'un vendeur ordinaire pour le reste de votre vie.
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