Buying a building with existing tenants can be a great way to grow your property management business. Instead of starting from scratch and having to market your property to fill vacancies, you already have tenants and the resulting cash flow.
That said, buying a property with tenants is not without its challenges.
Keep reading to learn more about some of the main reasons property managers look to grow their portfolios by buying properties with tenants and what you can do to prepare to take on a property where people already live.
What Are the Benefits of Buying a Property with Tenants?
Property managers decide to buy properties with tenants for several different reasons. For starters, because the units are already listed and people already live in them, property managers gain immediate rental income without having to incur hefty marketing costs. Lease agreements are also signed, so property managers don’t have to allocate administrative resources to that task.
What’s more, purchasing occupied units usually means that the buildings and structures are up to code. However, you can’t just assume this to be the case; you need to verify it. Similarly, the units are likely to be in liveable condition—potentially even recently renovated before the sale—which translates into lower maintenance and upkeep expenses.
Additionally, because units are already occupied, property managers don’t have to worry about paying out real estate broker fees, enabling them to further protect their margins.
How to Prepare to Take on a Property with Tenants
Before you sign on to purchase a property with existing tenants, it’s important to spend some time researching potential legal obligations to understand what you’re getting into.
First, you need to check out the terms of the leases the existing tenants signed. Though it varies on a state-by-state basis, you will most likely have to honor the existing leases and let tenants continue living in the units they occupy.
In the case of tenants with month-to-month leases, you may be able to either end the lease or increase the rent as long as you give adequate notice. Tenants locked into longer leases have the legal right to stay put if they so choose, but you may be able to buy them out of their current contracts if desired.
Before signing a contract, you need to conduct your due diligence to ensure units are up to code and in move-in condition. The last thing you want is to learn the hard way that you bought a property that’s somewhat of a lemon.
While you’re at it, ensure you have enough landlord insurance to protect against potential damages and liabilities. Otherwise, it may be only a matter of time before you’re on the hook for a bigger settlement than you can afford.
How Netintegrity Can Simplify the Process
Buying a property with existing tenants is a big accomplishment. At the same time, it’s also a high-stress situation.
That being the case, there’s no sense in making the process any harder than it has to be.
With Netintegrity’s powerful software purpose-built for property management to guide your company forward, you can streamline all property management operations, making it easy for your team to work productively and cover lots of ground in less time.
On top of that, Netintegrity also enables property management companies to easily stay on top of preventative and routine maintenance, extending the life of your investment.
To learn more about how Netintegrity can help your property management company acquire a property with existing tenants without major headaches, request a demo today.