Buying a Turnkey (already occupied) Rental Property
Once in a while, there are opportunities to buy investment properties with tenants in place already. This could be a great thing as it would provide immediate cash-flow upon closing.
- Carefully review the lease agreements! Be sure to verify the lease start/end dates, deposits on file, rent amount, any pet deposits/income. Not all info on the MLS may be correct so it’s important to verify. This will give you the info you need to verify your projected ROI. Please pay special attention to the lease expiration dates. If a lease expires or you anticipate a move-out during the contract period, you’ll want to factor any new lease commission or make readies that you will have to do once you close. Last but not least, be sure to get a copy of the ledger for each tenant; you’ll want to know if you’re inheriting a tenant that pays late all of the time or that pays on time. You’ll want to make sure that the tenant is in good standing at the time of close (i.e., current on their rent), especially if you consider keeping the tenant in place.
- Get bids for any work that you anticipate! Post-inspection you’ll have an idea of all of the repairs that are needed on the property (if any). You’ll want to get some estimates for these repairs to use as you negotiate during the option period.
- Make sure the contract specifies that rent and deposits will be transferred at closing! You’ll want to make sure rent is prorated according to the close date and that you receive the deposits held at closing.
For more tips or if you’re considering buying a turnkey property, feel free to reach out to us!