A Complete Guide to Buying a Rental Property with Existing Tenants

Key takeaways:

• Understand how to buy a property without any hassles.
• Associate with professionals who can help you find the right property and ensure you achieve your desired investment goals with finesse.

In March 2023, the average UK house price was £285,000, which is £11,000 higher than 12 months ago.

So, are you considering purchasing a rental property in the UK?

But what if the existing property already has tenants?

Would you reject the opportunity?

Of course not. 

Who doesn’t want a rental income from day one without putting in the hard work of attracting new tenants, right?

Let’s understand the nitty-gritty aspects of buying a property with existing tenants.

Why Is Buying a House with Tenants Great for You?

Multiple reasons can excite you about buying a property with existing tenants:

The potential for steady income

If the existing tenants are willing to pay their rent on time consistently and want to continue staying in the property, then you can get a stable source of income as a new owner.

It makes your investment less risky and more appealing because you will only have to find new tenants after a while.

Reduce the vacancy risk

As you’ll have reliable tenants staying in your new property, you remove the vacancy risk until their agreement lasts. Purchasing a rental property with no tenants won’t give you any steady income.

Reduced marketing and leasing costs

Finding new tenants can be costly and time-consuming. However, you can bypass the cost of marking and leasing your property to find the right tenants. It can help you save time and money so that you can focus on using the funds in a more impactful area.

Ability to negotiate a lower price

Property prices with sitting tenants are usually lower in the market than vacant ones. You get the upper hand to negotiate the price lower and book yourself a great deal for your future goals.

Although these benefits can be enticing, opportunities and risks come hand in hand, and you have to bypass the risks with the right knowledge and experience.

Challenges of Buying a Home with Existing Tenants

If you are unaware of the challenges, you might fall into difficulties by purchasing a property with existing tenants. Here are the challenges:

Managing the tenants

As a new owner, you must be aware of the existing tenants. 

You are responsible for managing them and ensuring they comply with the lease agreements. It can also involve addressing maintenance requests, collecting rent, and handling disputes.

Handling the existing lease agreement

As a new owner, you must adhere to the terms of the existing lease agreements, which include the duration of the tenancy and any provisions for rent increases or other changes.

Dealing with the turnover

If your tenants move out, you must find new tenants to ensure your apartment is open and you have a steady rental income flow. It requires more time and capital from your end.

Also, if you are new to onboarding tenants, your complexity may rise due to inexperience. 

Tenant conflict

There is a risk of conflict with the existing tenants. You must remain clear with your tenants if you have different expectations or policies. 

If there is a disagreement, you should approach the issue professionally and maintain a positive relationship with the existing tenants.

Now that you know the pros and cons of buying a house with existing tenants, let’s go through the detailed steps for executing the investment.

How to Buy a House with Existing Tenants?

Here are the detailed steps that can help you buy a house with existing tenants with no issues:

1. Research the Property: Look into the property’s details and history to understand the nitty-gritty aspects of the property.
2. Review the Lease Agreements: Check the contracts to see the tenants’ agreement. It can help you clarify things and ensure better tenant management.
3. Assess the Current Tenants: Get to know who’s renting and their payment history. The step is crucial because it directly impacts the stability and profitability of your investment.
4. Negotiate the Purchase Price: Talk about the price and try to get a good deal. If you’re considering financing your purchase, understanding buy to let mortgages can help you secure the right deal.
5. Close the Sale: Finish the buying process and make the property yours.
6. Communicate with the Tenants: Inform the tenants about the change and what to expect. Remain professional and transparent about the process. Also, try to build a solid relationship with your tenants.

Once you’ve completed the process, you’ll be done. But to avoid the hassles of going through these steps, you can associate with a professional who can provide you with the right assistance.

Choose Pluxa Property

We, at Pluxa Property, are a professional property investment consultancy that specialises in various areas across the UK, including Birmingham, Coventry, Dudley, Nottingham, Derby, Manchester, York, London, Leeds, Bournemouth, Weymouth, Torbay, Cardiff and Oldbury. 

We offer services tailored to your needs, whether you are a first-time buyer or an experienced investor looking to expand your portfolio. Our team can provide tailored assistance to finalise your rental property investment with existing tenants.

So, what’s making you wait? Contact our team now.

FAQs

What are the questions to ask when buying a house with tenants?

When you’re thinking about buying a house that already has people living in it, there are some important questions you should ask to make sure everything goes smoothly:

• What’s in the lease?
• Are they good at paying rent on time? 
• Did they pay a deposit? 
• What repairs have been made? 
• Who are the tenants? 
• Any problems with the tenants? 
• Do the tenants want to stay longer? 
• Who takes care of the property? 
• What’s included in the rent?
• Can you check the property?