At first glance, buying a home that’s being rented out by the current owner may not appear different from buying any other home. However, there are a few extra things to consider before you put in an offer.
If there are currently tenants in the home, you should ask to see a copy of their lease. Selling a property that’s rented out doesn’t render the tenant’s lease null and void, but rather transfers the lease to the new owner. Therefore, if you want to occupy the house once you take possession, you need to make sure the tenants will be gone. That could be a problem if there’s an “option to renew clause” in the lease. Speak with your lawyer and add a clause into the contract stipulating that the house must be “delivered vacant at closing.”
Wear and tear
Tenants may not take the same care with a property that an owner would. So, even if the owner has done regular maintenance and made frequent visits, a house that has been used as a rental should still be carefully checked for above-normal wear and tear. It’s also a good idea to look into the history of past insurance claims on the property, as it may give you a clearer picture of any previous damage to the home.
Extra time and expense
If you’re considering buying a house that shows some signs of extra wear and tear, don’t forget to factor into your budget the cost of any necessary repairs. If you’re going to have to set some money aside to pay for new flooring, for example, it could affect the amount of money you will have available for a down payment. Depending on the scope of the work involved, you may also want to give yourself some time between taking possession of the house and actually moving in.
Take time to check out the area and ask questions about the neighbors. Are there families in the area? Is the area home to a large number of student renters? Are any of the home’s multi-unit rentals? If, so are there more vehicles that create congested parking? Some rental homes may not have as well-maintained exteriors, including lawns and shrubbery, as homes that are owner-occupied. While these things may not factor negatively into your decision, they could affect the resale value of the property.
Your neighbors not only often become part of your social circle, but frequently provide an added measure of security for your house, by keeping an eye on any suspicious activity when you are not there, and providing back-up for your children in the case of an emergency. It’s therefore a good idea to check if the neighborhood has a lot of other rental homes. If the rentals have a high rate of turnover, it could mean a revolving door of neighbors.
Finally, if you do purchase a home that’s been used as a rental, it’s a good idea to change the locks on the day you take possession. You never know how many spare keys are in circulation.