Does a house need to be vacant before you can close on a real estate deal?
There are many vacant homes across America today. However, some of the best house deals are those which still have people living in them. That could be the current owner who is in a distressed situation, or an existing tenant. Great deals can be negotiated on these properties. Yet, many new investors are not versed about this situation and how to handle it.
You can write a deal and go to contract on any property, regardless of what it is occupied or vacant. Your contract can specify whether it should be vacated before closing. Sometimes quirks do come up; such as squatters moving in, or sellers not finding somewhere else to move in time. In these cases you may be able to postpone and extend the closing date until the property is vacated.
If the property is leased, your local real estate laws may dictate that the lease survives the sale of the property. That means the new owner has to honor any existing lease. If you are buying an investment property this may be a great bonus. If the tenant is paying on time, then it saves you the time, risk, hassle, and money of going out to find a renter. Just make sure you verify their status, rents, lease term, etc. If the tenant isn’t paying, price in a discount for having to remove them, or ensure they will be evicted before you close.
Many distressed sellers will find it hard to move. It can be hard for them to rent or buy anything. Others may just find their own purchase transactions are delayed, and don’t have somewhere to move immediately. In these cases you can extend your closing date, or even leaseback the property to the previous owners. This is not uncommon, but it can be unpredictable. If they were not paying their mortgage, and the mortgage company was not able to have them evicted, then how are you going to do it?
If you need the property vacant, then it can be smart to help occupants move. Introduce them to a good real estate agent who will find them another home to buy or another rental. Or you may have an investment property they could rent. This is more desirable than leaving them in the existing property, as it breaks that emotional detachment and sense of ownership they may have. Get them into something they can afford to keep.
When buying a rental investment property, it can work well when a home is already tenant occupied. If there is a non-performing tenant, price that in or plan to have them out prior to purchase. If you are buying as a new residence, or to flip with major rehab needs, or you need a higher paying tenant – then have it vacated before closing. You have the right and it is good practice to walk-through the property within 24 hours of your closing. In conclusion it is also good to know the market and how quickly you are able to turn the property and have a new tenant in place. Keeping this in mind and being educated on the process of eviction should help you buy the right properties and not be afraid of purchasing rentals with tenants in place.