It might initially seem that buying a house that was once used as a rental property is no different from buying any other house. That’s not necessarily the case; while it’s not entirely different, there are a few things you should definitely keep in mind before you write up and present an offer.
What Is The Physical Condition
You should just assume that a home that is rented is not taken care of like a home that has the homeowner living in it. That’s not to say that folks who rent are bad people, we’ve all been there before as a renter. There are many tenants out there that are wonderful, responsible people -- but part of the draw in renting a home is that you, as the tenant, are not responsible for major repairs. Nor is a renter going to care for the property at the level that the homeowner would.
With the homeowner absent from the property most if not all of the time, it stands to reason that certain maintenance issues might go undetected. Before you make your offer on the home, carefully go through it to examine wear and tear, wall cracks, water marks etc. Find out if you can look into the history of past insurance claims in order to gauge previous damage.
The Home Has Tenants
If the home still has tenants living in it, make sure you get a copy of their lease to look over. In most states, buying a house with a renter in it does not give you the right to void a current lease. When you purchase the home, typically the lease is transferred to you as the landlord. If you intend to live in the house right away, check to make sure that the lease will be up and that there is no option to renew it within the language of the lease. You may even want to consider speaking to an attorney to ensure that something is put into the sales contract stating the property will be delivered vacant at closing.
Neighborhood and Security
You want to look around the neighborhood to see how many “for rent” signs or “for sale” signs are up. There are several reasons for this. One of the advantages of living on a block on which most homes are occupied by their owners is that homeowners tend to look out for each other. With more unoccupied properties in the neighborhood, there might be more crime and transient traffic than you might want for the safety of your family. Talk to some of the folks living on the block.
Owners who live in their property also tend to look after the upkeep of lawns, repairs and paint jobs on their own homes, which greatly affects neighborhood property values.
Generally, if there are many homes in that neighborhood that are for rent or for sale, you will need to pay closer attention to the price you offer because the home might not appraise for the sales price that you offer. It could be lower. Always put in your sales contract offer a way to get out of the deal if the home does not appraise for the sales price that you agree on. You could be stuck with paying more for a home than you can get financing for.
Be sure to change the locks right away if you are buying a home that has been a rental. Who really knows how many ex-tenants (and their ex-boyfriends and ex-girlfriends) have keys to the place? The last thing you need is someone coming back to retrieve something he has buried under the floorboards of the guest bedroom while you are sleeping.
Home Improvement Projects – Think Green and Monthly Savings
Chances are, the investor you are buying the home from probably didn’t go all out with higher end appliances and amenities. If you are going to purchase a home that has been a rental, you are probably going to want to make upgrades and repairs to the property.
If you are planning on making some changes to the home, make sure that you calculate this extra expense. Make sure you include this extra needed money when figuring out how much you can afford for a down payment and factor in some time for these repairs and upgrades before determining a move-in date.
In today’s day and age, consider putting in a new solar water heater, and other energy efficient appliances. These improvements will go a long way in the future for resale value and appeal, not to mention monthly savings on your utility bills.
There is certainly nothing wrong with buying a property that has spent a portion of its life on the rental market. These few extra considerations might just save you money and hassle if you do decide to buy.
Article provided by Gary Nordhoff. Gary is an independent marketing consultant, a real estate investor, and a proud homeowner.
This Article is designed to be of general interest and should not be considered legal advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal legal adviser.
