Good questions to ask when buying a tenanted property

Good questions to ask when buying a tenanted property

20:55 PM, 20th March 2015, About 8 years ago 8

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Buying a tenanted property can have many advantages, immediate cashflow being an obvious one. However, you need to be sure that you are not taking on another persons problems so below are some of the questions we recommend you to ask the seller. Questions to ask when buying a tenanted property

1) How many tenant changeovers have there been in the last 5 years? If the answer is three or more try to establish why people don’t stay very long.

2) How long has the existing tenant been in situ?

3) Has the tenant always paid rent on time? Can that be evidenced with statements?

4) Which scheme is the tenants deposit protected in? Answer should be DPS, TDS or MyDeposits – you will need a copy of the deposit protection certificate if you intend to proceed with the purchase. You will also need a copy of the tenancy agreement.

5) What are the current management arrangements? You may wish to obtain a copy of the existing management contract but you are under no obligation whatsoever to stay with the same agent. Compare what they are providing/charging to THIS. If there are any termination fees these are between the contracted parties, i.e. the agent and the existing landlord, not you.

6) What if any insurance claims have you had on the property? By all means seek to obtain a copy of the current insurance documentation and compare the premium/cover HERE – our insurance partners GUARANTEE to beat any like for like quote.

7) Is the property subject to HMO licensing, Selective Licensing or Additional Licensing? If so, what are the fees and is it licensed now?

8) Is the property freehold or leasehold? Note that you will have to pay ground rent and service charges on leasehold properties so remember to ask how much they are, if they are applicable.

Buy Sell Tenanted Buy-to-Let Property

ADDITIONAL TIP 1 – To calculate figures such as net cashflow, return on capital invested and mortgage interest break-even points (if you plan to have a mortgage) see our Landlords Calculator which also includes another list of useful questions.

ADDITIONAL TIP 2 – Don’t just proceed with your regular solicitor, there is much more advice required when buying a tenanted property and not all conveyancing solicitors have a good understanding of landlord & tenant law, never mind the experience and knowledge required to fully protect your interests. At Property118 we recommend

ADDITIONAL TIP 3 – check out our online buy to let mortgage quotation system. It will help you to identify; the best deals for you, maximum loan, monthly payments and more. LINK HERE

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9:38 AM, 21st March 2015, About 8 years ago

"Why are you selling?" is an obvious first question and a question to ask yourself is "What recent changes to legislation (national as well as local authority) might be making this person sell?" These may well be the exact reason you should not buy.

Remember when Universal Benefit was first mooted? Many smart landlords got rid of their "lucrative" BTL's to people unaware of the changes and boy did they stitch a few unsuspecting potential landlords up......

Sunny K

9:39 AM, 21st March 2015, About 8 years ago

Great advise Mark. We had particular discomfort with point 5. We bought a tenanted property (occupied for last 4 years by great professional family) with 2 year still outstanding. The tenancy duration and restricted lending options for BTL mortgage meant we got 30% discount on the market value!. The letting agents (the quite famous one starting with F) demanded we pay them 15% of rent + VAT for the remaining two years tenancy on sales completion. We declined. They withheld the tenancy deposit and threatened to take legal action.We contacted with mydeposit who were useless and so were the conveyancer from both side. We ultimately sent the agents a legal notice and were paid the deposit as well as the outstanding fees waived. The seller had to shelve out the agents fees. The seller tried to recover the fees again from us. We held firm to intimidation and they went away. I subsequently found out that the tenant were happy to shorten the duration of their tenancy to help the sale but the agents blocked it.

Romain Garcin

9:56 AM, 21st March 2015, About 8 years ago

Reply to the comment left by "Sonny Kagdi" at "21/03/2015 - 09:39":

I think that you should not even have got involved with the seller's agent.

Regarding the tenant's deposit, that should also only be within you and the seller: It should be a condition of the sale that the seller transfers the deposit to you, then it is his problem to deal with anyone holding the deposit on his behalf.
In the worst case he would have to pay it to you then try to recover it from his agent.

Sunny K

15:49 PM, 21st March 2015, About 8 years ago

Reply to the comment left by "Romain " at "21/03/2015 - 09:56":

Not get involved with seller agent ! How can you buy a property without getting involved with seller's estate agent ? The agents advertise the property, do viewing, take offers and coordinate sale process and I would think its very difficult to buy a property without involving the seller agents. Also it is a common practice for estate agents to manage the deposit on behalf of landlord and deposit schemes generally only detail with agents who register the deposit rather than landlord. Unfortunately the logistic of these process are much more difficult than "in theory"

Romain Garcin

16:08 PM, 21st March 2015, About 8 years ago

Reply to the comment left by "Sonny Kagdi" at "21/03/2015 - 15:49":

Hmm, of course you have to deal with the seller's estate agent, but not with the seller's letting agent.

If they both happen to be the same company then you only discuss with them in their capacity of estate agent (i.e. dealing with the sale).

Indeed, it is common for a letting agent to deal with the deposit on behalf of the landlord.
However, you agree a sale contract with the landlord, not his letting agent. It is for the landlord to deal with his letting agent.

Mark Alexander - Founder of Property118

21:02 PM, 21st March 2015, About 8 years ago

There are very few solicitors experienced in buying tenanted properties, when you find a good one you will be able to relax in the knowledge that they will deal with agents, deposit protection and tenancy issues so that you don't have to worry about matters such as those mentioned above.

With regards to purpose of sale, that will always be a difficult one to check out, in much the same way as it is for pretty much any high value item, whether it's a car, a watch, a vacant property or a buy to let.

Neil Robb

19:57 PM, 1st May 2015, About 8 years ago

Hi Mark Alexander

I have just bought my first tenanted property. The tenant has told me he moved into the property in 2008. His ex wife who has since died moved in around 2006 ? There is no paper tenancy agreement available. My solicitor thinks this could be termed a protected tenancy.

The tenant happily signed a new agreement with me in March 15 and knows nothing about any protected tenancy. And is very happy to be able to continue to live in the house he has been in for years.

I believe given the fact there was no protected tenancy in place and the tenant has signed a new agreement with me this should not make any difference. Today I received a letter from the solicitor reiterating what she has previously stated and excepting my tenant saying he moved in 2008 therefore not a protected tenancy as we have his word for this. And this may be difficulty when I decide to put a mortgage on the property. I cant see why.

I would appreciate your thoughts and anyone else who would like to contribute. Am I missing something.

Romain Garcin

21:29 PM, 1st May 2015, About 8 years ago

Hi Neil,

Is the property in Northern Ireland?

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