Buying a rental property is a popular way to invest. But what if you’re buying a house with tenants? We’ll fill you in on what you need to know.
So you’re primed to expand your financial portfolio and want to buy an investment property?
2023 may provide promise, with double-digit percentage gains for rental returns predicted in 11 out of the 14 major Australian residential markets.
But what happens if the property you want to buy already has tenants?
Depending on your plans, this could be a major bonus. With tenants in place, the rental income can roll in from day one!
But if you want to make changes to the property or the tenancy agreement … things get more complex.
So without further ado, here are the ins and outs of buying a tenanted investment property.
Get to know your tenants
When you’re buying a house with tenants, you want to learn more about who’s occupying the residence.
If the rental history shows you’ve got reliable tenants, that’s super!
You can have rent coming in as soon as you acquire the property – all without the need to spend money on advertising or sifting through applications.
But if the rental history is a worrying read, you can’t just evict the tenants to find new ones.
As the landlord, you’re obligated to honour the existing lease. There is state and territory government legislation you’ll need to adhere to as an owner, with certain processes and procedures to follow if you want to go down the road of ending a tenancy.
Is the property in good condition?
Be thorough in investigating the condition of the property and ask if there are outstanding maintenance requests. This can help you avoid unexpected costs.
As the owner, you’re financially responsible for most repairs. You need to ensure the property is maintained in a timely fashion as per the tenancy contract.
So if there’s a laundry list of things to be fixed, you‘ll want to budget for it.
What if I want to make changes to the tenanted property?
You’re obligated to honour the term of the existing lease. That means if you want to make changes to the tenancy agreement (like increasing the rent amount), you’ll need to wait.
Or, for instance, you want to make non-routine renovations to your property during the lease period – that’s possible, but you’ll have to negotiate with your tenants.
Extensive renovations could affect the liveability of the property, which may mean they reject your request to carry out the works and you have to wait until their lease expires.
Ultimately, the only way you can make changes while the lease is in place is through mutual agreement with your tenants.
Hire a property management professional
A good property manager will fill you in on your obligations and maintain the smooth running of the tenancy.
If you like the way things have been handled, you can choose to stick with the existing manager.
But if you want to change your property manager, you can. You’ll most likely have to provide a period of notice to the property manager. The duration depends on which state or territory your property is located in.
Alternatively, you can manage the tenancy yourself. Just be sure you’re across all the legislation.
Property management can be a demanding job, so make sure you know what you’re getting yourself into before taking it on!
Get in touch with Soho Home Loans
Ready to jump into property investment? Give Soho Home Loans a call today!
We can help you navigate the process by finding suitable loans, unlocking existing equity and working out your borrowing power.
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