Tuesday, March 6, 2012

Advantages of buying occupied rental property

Some investors will always say that you are better off buying rental property that is unoccupied so you can start fresh.  With an empty property you can handle all repairs and remodels before having to deal with a tenant.  You also will be able to screen your own tenants and be sure about the quality of tenant you have in your property.  However, there are several advantages that can often lead to more money in your pocket if you are buying a fully rented income property.  I will list a few for you and you can make your own case as to what would be best for you. 

The number one reason I like property that is already rented is that you an receive rent income right at closing.  You can stipulate that if you close on the 5th of the month that the owner must collect all rents and transfer them to you at closing for the 25 days remaining in the month.  The prorated rents for a four plex could be as much as 3000 off of you needed cash as closing.  You also can collect the deposits at closing from the previous owner that may be in the same amount.  Another 3000 would make the bonus of cash up to 6000 to your side of the ledger. 

Now depending on the property and the previous owner you may just get the owner to put up the amount of rent rather than collecting it.  If the current owner has a "don't wanter" he may be tired of dealing with tenants and rent collection and may see the 6000 as cost of getting the property off his hands.  Either way it is money in your pocket and that is the idea with income property.  Income in your pocket. 

You have to consider the downside as well but I have found it much easier to take over a building that was fully occupied in most cases.  It is usually a good indicator of the habitability of the property as well.  If you can verify leases of several months or more and see that the tenants have paid the rent you will be less likely to have problems. 

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