Dear All,
I am new to the property investment game and would be appreciative for any advice given.
So I've researched my location and found a property which seems to fit my criteria.
Sale price $220k – $240k current yield $240pw.
It's already tenanted at the above rental and I'm told by the agent the previous Investor is cashing in.Is there any negative side to purchasing an investment which is already tenanted?
It's currently under lease till March 09, if I purchase this property wouldn't the tenant have to engage in new lease terms with myself?Thanking you in anticipation,
Michael P
Hi Michael,
The lease that the current tenant is on stays put under the current arrangements, your name is merely changed in the bond documents, and you notify them on however you decide to collect the rent (using a managing agent or yourself)
A couple of questions, if it is tenanted at above market rates and this tenant does not renew the lease, what return are you looking at? If the investor is indeed cashing in on the fact that there is an above market rent, I presume you are paying a premium for this property. In the surrounding area, what are the other rental prices, sale prices and overall yields? Does it still stack up?
Mick
Thanks for your help Mick.
Yes the rental income is appearing to be approx. $50 more per week than normal for this area.
The expected yield for this area is around 4.5%.Though the asking price is reasonable for this area also, I have sales figures for other houses in this street and having taken growth in mind the current asking price isn't overvalued.
Thats why it concerns me why the investor might be selling, considering if he/she was a savvy investor, this looks like a reasonably good value deal from what I can tell.
be sure to check the entry condition report when taking over an existing property.
Michael,
Please don;t be put off by this. I am in the process of listing a place that has an above market rent – only by around$20 a week – the tenant is fantastic and has been their 3 years and wants to stay on. We are selling because we made mistakes with our finance and this is impeding our ability to move forward at the pace we would like. There might be any number of reasons why they are selling so please keep an open mind. If you research it properly, and it fits, why not buy. The good thing is, you do not have a period of vacancy and a lease fee when you settle.
If it really concerns you, why not make your offer on the condition that you settle on the date the lease expires. This way you can have a new lease in place on settlement.
Good luck
JLHi Michael
As has been mentioned as long as the entry report and the condition of the property on the date of settlement is it was on your orginal inspection and the market rent for the property has not been subsided to sell the property then no you really can't go too far wrong.
Your financier will be happy to hear that it is tenanted already and whilst they would always consider a rental assessment a lease in place is a lot stronger.
Just make sure you structure both the property transfer and loan correctly as setting up wrong in the first place will make things difficult down the track.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Just make sure you structure both the property transfer and loan correctly as setting up wrong in the first place will make things difficult down the track.
Hi Richard,
What do you mean by structuring the property transfer and loan correctly? Excuse my ignorance.
It's just my first investment property.Michael
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