Purchasing a rental property is a viable way to get the returns of your investment immediately. Because you’re taking over a part of a business establishment, you’ll generally have an easier time turning it into an asset that contributes to your revenue stream. However, there are some caveats you need to consider during and after the settlement for a rental property.
Understanding the value of buying a rental property
A good investor knows how to allocate their assets to gain self-sustaining income. One excellent way to increase your cash flow is by looking for properties that require little to no capital with a relatively rapid return on said investment.
Purchasing rental properties is a much faster process than building a residential complex from the ground up. Since it’s already an established business model, you’ll only need to handle the turnover of ownership through a settlement. This lets you reap the benefits of receiving monthly dues from tenants almost immediately, providing a steady means of earning more income.
Confirming liabilities between different parties
On the matter of debt, it’s vital to confirm the liabilities between the property’s buyer, vendor, and the current tenants. Purchasing a property through a settlement should free the purchaser from any responsibility in recovering pre-existent debt. However, the tenants need to distinguish to which party they should pay their dues.
Any owed dues during pre-settlement and paid post-settlement must go to the vendor. In contrast, advanced payments must be forwarded to the buyer for reimbursement within the allotted months after post-settlement.
When buying a property with terms indicating a vacant property on the day of settlement, the vendor is responsible for following the legal laws of vacating the property. It’s not the purchaser’s responsibility to handle the egress of the property’s current tenants. It’s customary to have a 60-day written notice for the vendor to allow tenants to vacate the premises and settle their accounts. This can be a challenging or straightforward task, depending on the leasing arrangements of the individual units’ occupants. If the property isn’t tenant-free at the agreed-upon date, the buyer is eligible to delay the settlement at a later date.
Dealing with existing tenants
While you can start with a clean slate, it’s possible to purchase a rental property without evicting its current inhabitants. In fact, properties with current tenants are generally more marketable for sale to potential investors. As the new property owner, this allows you to receive a faster return on your investment without sourcing a new batch of tenants.
To maintain your current set of tenants, you’ll need to clarify the type of lease agreements they had with their former landlord. It’s your prerogative to alter or adjust their current contracts with the properties being in new ownership. After renewing their contracts under your updated terms, you should then decide if you need a property manager to maintain it.
Before committing to any investment, it’s vital to cover any potential complications you may run into during the sale. Doing so keeps you from dealing with unexpected oversights or hidden costs that can compromise your purchase. With anything related to real estate, it’s best to settle your negotiations with an expert conveyancer. They can streamline the buying process for all parties while confirming that all procedures follow proper legal documentation. A good conveyancer can save you thousands of dollars and provide you with a sense of relief with your newly bought real estate.
Purchasing properties of any kind will require you to undergo specific processes that consider several legal and state-regulated variables. At Bickell & Mackenzie, we encourage our clients to allow us the opportunity to advise their purchases and sales beforehand to ensure a smooth transaction. If you need help from conveyancing lawyers in Redland Bay, contact our office at 07-3206-8700 to schedule an appointment today.