While some buyers might be open to this situation, others may not want to deal with the hassle of managing renters. If you find yourself in the latter category, here are some things you need to know before you progress with the purchase of a tenanted property.

What you need to know if you are occupying the tenanted property

If you do plan to occupy the tenanted property, one of the most important steps is to review the tenancy agreement between the tenant and the current owner. This agreement will typically fall under one of two options - periodic or fixed-term.

A property that is under a periodic agreement means tenancy is on a a month-to-month basis, continuing until either party gives notice. This agreement must be in writing, specifying when it will end. On the other hand, a fixed-term as the name suggests, means the tenant agrees to rent the property for a fixed amount of time, generally 12 months.

Once the fixed-term lease is completed, it may roll over into a periodic agreement. However, there are instances when the landlord and the tenant agree to have another fixed-term deal. It's essential to know the type of lease the property is under, and if it is a periodic lease, you can request that the landlord have the property vacated. The landlord will give the tenant a notice period that complies with specific state or territory regulations, typically around 60 days. This is to provide enough time for the current tenants to find a new place to live.

However, if the property is under a fixed-term agreement, and the tenancy agreement lasts for another seven months after you purchase it, you are not entitled to force the tenant to move out of the property. This means as the new owner, you will have to acknowledge and respect the tenancy contract. One way to negotiate with the tenant is to see if they can end the lease early, but there are no guarantees that the tenant will agree to your terms.

Factors to consider when taking over a tenanted property as the landlord

If your goal is to take over the property as a landlord, then it's essential to know that once the settlement is complete, all lease money will be paid to you. During the settlement process, the bond, tenancy, and rent details should be transferred to your name. Buying a tenanted property is also an excellent way to start your investment portfolio given the fact that you don't need to put in extra hours of effort to advertise and look for new tenants.

However, before you take over the property, there are a few things you need to consider to avoid any risks which we will look at below.

  1. Tenant profile: It’s important to understand the background of the tenant, including their career, how long they have been on the property, and their track record of paying rent on time. Understanding the background of a tenant will give you an idea of who you are dealing with, and (hopefully) provide you with peace of mind knowing they are reliable.

  2. Lease agreement: Review the current lease agreement of the property. As well as lease terms, it’s important to know the amount of bond held and how much the tenant pays in rent each week. Ensure that the tenants have already settled the bond with the current owner, and if there are any damages or break lease fees that they are deducted from the bond.

  3. Maintenance: Take note of any immediate damage or maintenance requests that the tenants might look to take advantage of considering you are the new owner. Ask the previous owner to check if there are any potential damages or existing issues that could be a cause of concern in the immediate future. This will aim to avoid unexpected hits to your back pocket once the transfer of ownership is complete.

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LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkComparePromoted ProductDisclosure
6.04% p.a.
6.06% p.a.
$3,011
Principal & Interest
Variable
$0
$530
90%
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 Disclosure
5.99% p.a.
5.90% p.a.
$2,995
Principal & Interest
Variable
$0
$0
80%
  • A low-rate variable home loan from a 100% online lender.
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 Disclosure
6.14% p.a.
6.16% p.a.
$3,043
Principal & Interest
Variable
$0
$350
60%
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Important Information and Comparison Rate Warning

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