Pros and Cons of Buying a Property With Sitting Tenants
Research carried out by Nottingham Building Society says that 21% of buy-to-let investors have to wait around four months before finding tenants for a property. This can be a costly move that means the property remains empty with no means of income coming in during that time.
According to leading property services provider, Romans, investors should consider buying a property with tenants in as it could save time and money and give you instant ROI. But you need to remember that when you buy a property with a tenant in situ, you take over from the original landlord, meaning you are bound by the same legal obligations. As with any property transaction, there are pros and cons of buying a property with a sitting tenant, so think carefully before proceeding with any purchase.
If you don’t want to manage this process yourself, you can employ a lettings investment team to help and advise on everything from your legal rights and responsibilities as a landlord to tenant rights, expectations and contracts.
Pros of buying a property with a sitting tenant include:
· The tenancy agreement is already in place – no additional hassle trying to agree terms and conditions with a new tenant. However, it may be that you want to create a new agreement: to do this you’ll need to get the tenant to agree to any changes
· Less of a financial burden – you’ll start to receive rental income immediately after completion
· No new set-up costs – including finding a tenant, paying for an inventory or drawing up a tenancy agreement
· Tenants have already been vetted – that means you will have all the information about payment history, occupation, references, how well they look after the property and which protection scheme their deposit is being held in
Cons of buying a property with a sitting tenant include:
· Eviction and rent increases – if a tenant has been in a property since before 15th January 1985 they will be ‘protected’ tenants, meaning it’s more difficult to evict them and rents will be protected from ‘market rate’ rises
· House value – you may find that when you come to sell the property, the price may be negatively affected if there’s a sitting tenant in situ
· No relationship with the tenant – it can be tricky if you inherit a difficult tenant. A good idea is to try and meet them before exchanging contracts so you can start to build a relationship with them
Michael Cook, Romans Lettings Managing Director, says: “Property remains a great investment opportunity and buying a buy-to-let property with a sitting tenant means you can get an instant return on your investment. As soon as you complete the property purchase, you will begin to receive rental income and avoid any void periods.”
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