6 MUST HAVE CONTINGENCIES WHEN PURCHASING AN OCCUPIED INDIANAPOLIS RENTAL PROPERTY
We If you’re a current Client, or have spent much time on our website, you know what we have a fully functioning brokerage.
It’s something we’re proud of and something our Clients benefit from — whether we’re helping them add to their Portfolios or, when the time comes, sell their property.
While we have a very capable brokerage, we realize some of our Clients have their own Agent.
However, we’ve had some nightmare situations over the past several years with Agents who simply did not know the best way to represent their investor Client.
Representing a buyer for a personal residence is VERY different than representing a buyer who intends to use the property as an investment.
So, if you are an investor, or if you are an Agent representing an investor, please, please, please, take a few minutes to read some best practices when writing that offer.
TOP 6 ITEMS TO OBTAIN WHEN PURCHASING AN OCCUPIED RENTAL HOME
1. Current, Enforceable Lease – This is probably the most important item to obtain when purchasing an occupied property.
The Lease is your guidebook to taking on Tenants. It outlines rent payments, who is responsible for what, and most importantly, provides you with a basis for legal action should any need to be taken.
Without a Lease, you’re essentially inheriting squatters.
Just having a Lease in place is not always enough though. The quality and content of the Lease is just as, if not more, important.
We’ve seen some pretty bad Leases in our time and when I say bad I mean, not enforceable.
Just because a Lease states something and is signed by both parties doesn’t mean it will hold up in a court of law.
You need to have a qualified representative such as a Property Manager you trust or even a real estate lawyer review the documents to ensure you are protected.
2. Current Tenant Ledger – This is pretty self-explanatory. The Tenant ledger shows a history of the tenant’s rent payments and will show you if they pay on time, if they are current, etc.
If a tenant is 4 months behind on rent, that may impact your decision to purchase the property, so it’s important to get that information up front.
3. Pro-Rated Rent and Security Deposit Transfer – We see this way too often… Tenant Security Deposits are not transferred at closing, which puts the Buyer in a very difficult situation. Ultimately, the Owner of record is responsible for funding the deposit when the Tenant vacates.
So, if the Lease you inherit notes a $1,000 Security Deposit, be sure that gets transferred to you at closing.
In addition, you are obviously entitled to rent beginning the day you close. Title Companies should be well versed in establishing the proper pro-ration, so lean on them to ensure you receive the proper credit.
4. Tenant Contact Information – Clearly, you must communicate with your Tenant. Ensure you have all available contact information for ALL Tenants you inherit, including cell phone, work phone, email address, emergency contacts, etc.
5. Keys – Yes, seems obvious doesn’t it? However, for whatever reason, we see many, many homes close and no keys are exchanged.
Perhaps the Buyer just failed to ask.
In most cases, keys just don’t exist.
Whatever the case, you MUST ask for keys and, if you don’t receive any, be prepared to change the locks right away to ensure you have a working copy.
6. Tenant Documentation – There’s a lot of potential items that fall into this category. Be warned, you won’t receive most of this information, but it doesn’t hurt to ask. These items include:
- The application of all Tenants
- A move-in condition report or video
- Any renewal walk-thru documentation
- All notes regarding Tenant correspondence
Being a Landlord, as you may know, can be difficult.
But, being a Landlord without the proper information can be downright daunting.
So, be VERY proactive – and insistent – during the escrow period to ensure you get the right documentation which, in turn, ensures you have the best chance for a successful Landlord-Tenant relationship.