Finding the right investment is pivotal to a landlord’s success. You want a rental property that fits your budget and generates enough rental income to be profitable. When you are thinking about your next rental property, different types of properties offer benefits and challenges that are worth considering.

What about buying a rental property with existing tenants? Our Henderson and Las Vegas property management experts explore the pros and cons of buying a house with tenants to help you make the most informed decision.

PRO: Immediate Rental Income

The biggest advantage of purchasing a rental home that is already tenant-occupied is the immediate income. As soon as you own the property and become the landlord, there is a return on your investment with rent payments from your new tenants.

If you are looking for an investment that offers stability and security, this could be a good solution. Depending on the length of the existing lease, you may already have months of expected rental income and time to establish a relationship with tenants who are likely to renew their lease if things go well.

CON: Immediate Landlord Obligations

While you have the benefit of immediate rental income with an occupied property, you must also hit the ground running when it comes to your landlord duties. Tenants have rights and expect the services that were promised in their binding lease agreement. You must be prepared to jump right into your landlord role when you purchase a home occupied by tenants.

Some obligations you will need to fulfill include:

• Finding qualified professionals for repairs and maintenance requests
• Keeping the property safe for the tenants
• Following all local and state building and health codes
• Responding to tenant requests and questions
• Collecting rent and enforcing late fees
• In some cases, maintaining property amenities and landscaping

Familiarize yourself with the lease terms and understand what is expected of you before committing to a tenant-occupied home.

PRO: No Need to Fill the Vacancy

Filling vacancies can sometimes be challenging. Marketing your property to your target audience and attracting the right tenants often takes time, money, and an experienced digital marketing company, especially in competitive markets like Las Vegas and Henderson, Nevada. The longer your rental property sits vacant, the more potential income that is lost.

When you purchase a rental property with existing tenants, you do not have to worry about advertising right away. The remaining lease gives you a buffer to plan your next moves and create a strategy to maximize your investment return. You can also offer to renew the lease after the existing agreement expires.

RELATED: 7 Ways Vacant Rental Properties Are Costing You Money

CON: You Do Not Get to Choose Your Tenants

One downside to buying a tenant-occupied rental home is the inability to choose your tenants. Some landlords are meticulous about screening applicants and making sure tenants are more likely to pay rent on time, take care of the rental property, and follow lease agreement rules.

Although existing tenants may be ideal renters, there is also a chance that they are not. If you are not careful, you may get stuck with tenants who are difficult, financially unstable, or disrespectful. You should definitely weigh this factor when looking into an occupied rental property.

PRO: A Lease Agreement Is Already Established

If you are a new landlord or rental property owner, it could be a good thing to inherit an already-established lease. The terms are spelled out, and the tenant has agreed to them, eliminating the need to draft a new lease agreement while finding your footing in your new role.

The current lease agreement may also cover factors you had not considered or issues the previous landlord faced. For example, additional lease clauses may address extended absences, what the lessee is expected to maintain, and how sublets are handled.

CON: Must Agree to the Existing Lease Terms

A lease is a legal contract that only changes with a written and signed agreement by all parties involved. While this is generally a good thing for tenants, it means you will need to agree to the existing terms of the current lease.

Parts of the lease may not align with your vision for your new rental property, such as allowing pets or extended guests. You may also want to add specific rules to the lease, but you must wait until the current agreement expires before making updates.

PRO: The Property Is Up to Code

Another thing to consider with a tenant-occupied home is that the property should be up to code. In order to lease the home or property to tenants, the previous owner needed to ensure it was legally safe, free of hazards, and has up-to-date features, including:

• Electrical wiring
• Working plumbing system
• Smoke detectors
• Carbon monoxide detectors
• Functioning heat and cooling system

Check your specific state’s building and safety codes to make sure the rental property meets all requirements. In most cases, all boxes will already be checked if the renter-occupied home is for sale.

CON: You Must Deal with the Previous Landlord’s Shortcomings

Even if a rental property is up to code, it does not mean it is in great condition. The previous owner may have failed in their duty to keep up with regular inspections, maintenance, or repairs. As the new landlord, you may be facing a long to-do list and less-than-satisfied tenants who have high expectations.

In some cases, repairs can be a substantial expense that reduces your expected rental income. Be sure to do your due diligence before purchasing any rental home to avoid these unwelcome surprises.

Working With a Trusted Property Manager

If your landlord obligations are becoming challenging to handle on your own, it may be time to work with an experienced property manager. A local property management company will offer services that streamline your operations and help you make the most of your investment.

Black & Cherry Real Estate & Property Management helps Las Vegas and Henderson landlords with advertising vacancies, tenant screening, collecting security deposits and rent, maintenance, and more. We have the skills, resources, and decades of combined experience to help you take your rental income to the next level. Contact our property management team to learn more about our property management services!