Buying tenanted property is becoming increasingly popular, especially for experienced buy-to-let investors. As a new landlord, it can be appealing as you have a ready-made tenancy as soon as your property purchase completes. It’s not quite as straightforward as buying a property with vacant possession, however. As such, there are some things to consider before buying a tenanted property.
What is a tenanted property?
A tenanted property is one that is purchased with the current occupants still living there and on the understanding that they will continue to do so under the terms of their existing tenancy. This is different from buying a property with vacant possession. In this case, the property will be empty on the day of completion. When you take over ownership, the previous occupants will have moved out and all of their belongings removed. The only items left in the property will be those you’ve agreed with the seller.
Why buy a tenanted property?
There are lots of benefits to having tenants already living in a property that you want to buy as a rental investment. For a start, it avoids having a void period between the completion of your purchase and the first rental contract. Instead, you have an immediate return on your investment with the rental payments made by the existing tenants.
You also save time and money that would otherwise be spent advertising for new tenants. Tenanted properties are often sold for cheaper prices than those with vacant possession. This means you may also save on the purchase price.
You don’t need to spend time on viewings or worry about getting the property up to scratch and possibly buying furniture before any tenants move in. As the tenants are already living in the property with an established tenancy agreement, these matters have already been dealt with. This also applies to compliance issues. For example, fire safety and furniture regulations, a gas safety certificate, an Energy Performance Certificate (EPC) and an HMO licence, if applicable.
Aside from any practical issues that normally have to be dealt with for rental properties, having tenants who are already settled in the property can make your job as a landlord easier. The handover of the tenancy between you and the previous owner should be straightforward. For example, dealing with the tenancy agreement and deposit. Any maintenance issues with the property should already have been dealt with. If a letting agent already looks after the management of the property, the tenants will already have a relationship with them.
Try to meet the tenants before your purchase completes. This not only gives you a chance to get to know each other but you can also find out if there are any issues that you were previously unaware of.
Considerations when buying a tenanted property
Whilst there are lots of benefits to buying a tenanted property, there are various aspects to consider first. Be sure to check everything carefully. This includes the tenancy agreement, the deposit, the safety compliance within the property, the provision of compliance documents, any warranties that are in place and the HMO licence if the property should have one.
Check that an inventory has been done and, if not, ask for one to be carried out. Also check whether there are any issues that you may inherit, such as outstanding maintenance work or problems the tenants have had with paying their rent.
Find out who currently deals with the maintenance, such as a particular contractor or a letting agent who manages the property. You may want to continue using them, especially as they already know the property and the tenants.
The pros and cons of buying a tenanted property
At a glance, here are the advantages and disadvantages of buying tenanted properties.
Advantages
- Tenanted properties can be cheaper to buy than those with vacant possession.
- You don’t have to spend time or pay fees finding tenants.
- There is no void period once your property purchase has been finalised.
- You benefit from immediate returns on your investment via an established tenant.
- All safety and legal compliance aspects relating to rental properties should already have been dealt with.
- You don’t have to prepare the property, such as with renovations, maintenance or cleaning, before any tenants can move in.
Disadvantages
- You immediately take on the responsibilities of a landlord once the purchase completes.
- If the previous owner has neglected to deal with something, such as a maintenance issue, a health and safety aspect or obtaining a licence, you will be liable for this.
- You won’t have the opportunity to find your own tenants. This means you risk either not getting along with the current ones or discovering that there are problems with them.
- If there are issues with the tenants, it can be time-consuming and expensive to evict them.
We can arrange the finances for your buy-to-let investment
Whether you’re a seasoned landlord or it’s your first time owning a rental property, tenanted properties can be good investments. Our mortgage brokers are ready to arrange your buy-to-let or portfolio mortgage to finance your purchase, providing a tailored service. We can also arrange your landlord insurance to ensure that the right financial protection is in place. Just give us a call on 01322 907 000 to get started and take advantage of a tenanted property investment opportunity.