Should I purchase a rental with no tenant currently in it?

Question

I am considering a property that currently has a vacancy. Do most rental owners only buy a property if a tenant currently lives in it?

Jonathan Taylor Smith · Answer

@Husain Plumber - I HATE, HATE, HATE buying a single-family (or small multi-family) property with a tenant already present... Because that tenant has NOT gone through my screening and "training" (call it orientation) process to do and handle things in the manner in which I expect. They may not even meet my criteria. A vacant property is a clean slate for me to do my work. Now the exception to this would be a larger multi-family property that is 100% vacant... In that case, your risk is increased as the property has ZERO cash-flow and far higher holding expenses for you to cover out of pocket until you get some tenants in place.

Kyle J. · Answer

I agree with @Jonathan Taylor Smith that it depends on the type of property.  For single family residential properties, I prefer to buy it vacant and place my own tenant that I select and screen myself.  However, on larger multi-family properties, you likely couldn't even get a loan if the property is completely vacant.

Andrew Syrios · Answer

I almost only buy vacant houses and prefer them that way. Usually when there is a tenant, it just means we will have to delay the rehab. And it's often underrented or the tenant is bad.

Now if it's an apartment or portfolio of houses, then I want most to be leased.

Thomas S. · Answer

I prefer to target multis that have below market rents which means they will come with tenants but may have a vacancy. I prefer the vacancies as it allows me to get the unit to full market rent. Inherited tenants are more work since in my market rents are controlled. There is no way to get a unit to market without a tenant turn over. Because only a tenant can decide when to leave this means encouraging them to leave. Tenant turn over is a necessity in rent controlled markets.

I would definatly purchase a property with a vacancy.

Anthony H. · Answer

I buy single SFR empty and put a tenant in them because as mentioned above you buy the existing tenant, lease contract and all the unforeseen mess. Also if the house requires some work to be done it is easier when empty. On the other hand I wouldn't bother buying a multifamily with existing tenants. What are the odds that all tenants are bad tenants? The property will still cash flow even if one tenant is problematic.

Now you can find the rare SFR with great long term tenants in place. Just do your due diligence in either cases. GL

Patricia Steiner · Answer

I would be more concerned with how much the current market rent is, demand for rental properties in that area, and the financial impact of both on my investment.  Hope that helps...

Sam Shueh · Answer

Condition dependent and what you want to do with it...

Kat Rathell · Answer

Agreed - purchasing with a tenant has significant risks. It is nice to think you have immediate cash flow, but how do you know they will actually pay you and you wont need to pay for an eviction instead?

If you are hands-on and donyour due diligence, you should be able to get a new tenant in within a couple to a few weeks at the absolute max, and you will have peace of mind that the tenants will be good.

Jonathan W. · Answer

@Jonathan Taylor Smith

Very good point

You are depending on someone else’s screen process!!!

A house that was purchased with a tenant  I know of had a very good tenant so it can work either way but yes you are taking a risk on someone else’s work.

You know the old saying you want something done right do it yourself

Jonathan W. · Answer

@Husain Plumber

Very vague question but why not?

What’s the rental market like?

Do you need to do any serious work on the property or are you looking for immediate cash flow?

Obviously if you want to spend or do as little work making a property rentable and you want cash flow immediately you want a tenant

But if you can find yourself a good tenant as oppose to some tenant already chosen then that is for you to decide

More details will get your a more specific answer. (Like where!)

Also ask yourself how much more are you paying compared to similar properties because it has investors?

And why would someone sell with a tenant? A lot of times there is no bad reason but I am currently involved in buying a house where the original owners do not want to deal with getting rid of the tenants. Not because the tenants are bad but because they have a close relationship

I could go on but you get the idea.

Should I purchase a rental with no tenant currently in it?

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