It is well know that being a landlord is becoming less financially lucrative. What with higher taxes and more and more regulation, we are starting to see more properties coming to the market with tenants in situ.
There are a number of things you should be considering if you are buying a property with an exisiting tenant.
Trust your solicitor
You should find a solicitor who is experienced in dealing with this kind of purchase and who will advise you of any concerns they have from a legal point of view. A solicitor who knows the law inside out.
Finding a good lender
If you do need a buy to let mortgage, your lender will check that you are eligible to borrow the money your require. You will also need to do your sums and ensure that the rental payments will cover your mortgage repayments. The calculations by the lender will be based on the market value and not on current rental income.
Questions you will need to ask
Has the rent always been paid on time? Are they or have they ever slipped into arrears?
What is the current rent being paid, have any rent increases been implemented during the tenancy period, if so when?
How is the rent paid – Standing order, direct debit or is there another arrangement in place?
Are the tenants on housing benefit?
Do the tenants keep pets at the property?
Is the property currently managed by a letting agency?If so, will this arrangemnt continue once you own the property?
A new tenancy agreement
Should you decide that you want to purchase the property with an existing tenant, you will need to issue a new tenancy agreement. Ensure all relevant checks are carried out i.e Right to Rent.
You will also need to ensure that you are adhering to all the legal obligations that a landlord has such as a valid gas safety certificate.
The deposit will have been made to the seller, therefore it needs to be transferred to you. You will need to register it with an appropriate deposit scheme as soon as possible, this is quite easy to do. Check your legal obligations on this!
Buying the property with vacant possession.
You will need to ask the current owner (Landlord) to arrange to serve a section 21 notice to the tenant. Two months notice in writing will need to be given to the tenant. Should the tenant fail to move after the notice period, then the current owner should take legal advice.
Buying a property with existing tenants can be great as there are no initial voids on the property and you start earning and receiving rent from day one. Whatever you decide to do with the exisiting tenants, please make sure you go through the correct legal channels.
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