The instant cash flows and turnkey nature of buying a leased property may make it seem like a great option for your next investment property. But it’s desirable not to make an assumption that just because a property is leased, it is in good condition or that the tenants are responsible and punctual with rent payments. Instead, do your due diligence to ensure that leased property is a good investment.
One of the first things you should examine when considering a leased property is the current lease agreement. After you purchase a property occupied by tenants, you certainly inherit the lease agreement they signed with their old landlord. Because the lease is a binding contract, you will need to be comfortable living by the terms of that lease until it expires or comes up for renewal. In some situations, the tenant may be approved to terminate or renew their lease upon the property’s sale. Generally, you need to know what prior agreements govern your new investment.
Alongside examining the existing lease documents, it’s advisable to screen the current tenants carefully before acquiring 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. What is more, verify with the current owner or landlord that the tenant has paid a security deposit and that it is fully secured in a separate bank account.
Along with screening your tenants, it’s necessary to do a thorough evaluation of the property as well. To get a full sense of the property’s current condition, you will need to see the house’s condition and yard in person. With tenants already living in the property, it’s vital to know how carefully they are about keeping the property clean and maintained. Also, don’t forget to ask the current owner about any current or past insurance claims, especially if they are tenant-caused. Too many insurance claims might make it harder for you to ensure the property after the sale.
If everything turns out well, you may have discovered an excellent, tenant-occupied rental property. However, irrespective of whether your new Austin investment already has tenants or not, you will have to be ready to get and keep the property in habitable condition, see if the electrical and plumbing systems are safe and working correctly and that the structures are sound. While your new rental property may come with tenants already living there, the moment the sale is complete, you are fully responsible for managing and maintaining the property from that point on.
Property management can be a very complicated job, especially if you are doing it yourself. Instead, why not turn the day-to-day tasks over to professionals at Real Property Management All Connect. Our Austin property management team handles the hassles so you don’t have to. For more information about the property management services in Austin, contact us today or call us at 512-806-0606.