Purchasing a property with a sitting tenant.

[JohnLA]

Looking into buying an investment property.
I've heard buying property with a tenant in situ can be more hassle than its worth.
But we have seen a reasonably priced one bed house and are thinking of taking a chance on it.

Any advice or things to consider before buying the property?
Also, the rental income from the property is well below market rental value, is it possible to raise this to market value as the new landlord? (it is outside of RPZ)
Is it possible to have a new lease drawn up with the current tenant, or does the current contract still stand after purchasing the property?

 

[AlbacoreA]

I think the main issue is the banks. I've heard anecdotally they won't lend unless you get vacant possession. So check this out with the banks.

You're main restrictions are not the RPZ. But the COVID lockdown changes.

[broken link removed].

Rent freezes
From 2 August 2020, rent increases can take effect for tenants who have not been financially impacted by COVID-19. They must follow the usual rent setting and review rules inside and outside a Rent Pressure Zone (RPZ). If your rent is increased, no backdating is allowed.

If you have been financially impacted by COVID-19 and meet the requirements of the Residential Tenancies and Valuation Act 2020, your rent cannot be increased before 10 January 2021. The Planning and Development, and Residential Tenancies Act 2020 has extended these provisions from 11 January 2021 to 12 April 2021. It also includes some changes to the process landlords and tenants must follow to access these protections, see rtb.ie.

 

[elcato]

Also, the rental income from the property is well below market rental value, is it possible to raise this to market value as the new landlord? (it is outside of RPZ)
Is it possible to have a new lease drawn up with the current tenant, or does the current contract still stand after purchasing the property?

No and no. The tenant is there till they die or vacate voluntarily. Depending on your timescale for a return on your investment, as an example, a relative of mine bought with a sitting tenant in 1983 in an affluent area in Dublin. The tenent died in 2018 where the rental was 200 per month for half a house . Now the property has gained in that timeframe but he could afford not to be reliant on the rent.

 

[JohnLA]

I think the main issue is the banks. I've heard anecdotally they won't lend unless you get vacant possession. So check this out with the banks.

You're main restrictions are not the RPZ. But the COVID lockdown changes.

Yes I think you are right about the banks, but I heard different rules apply on a Buy To Let mortgage. But we intend to buy the property using savings so shouldn't be an issue.

Thanks for the information on rent freezes.

No and no. The tenant is there till they die or vacate voluntarily. Depending on your timescale for a return on your investment, as an example, a relative of mine bought with a sitting tenant in 1983 in an affluent area in Dublin. The tenent died in 2018 where the rental was 200 per month for half a house . Now the property has gained in that timeframe but he could afford not to be reliant on the rent.

Interesting. But what is the reason for been unable to increase the rent? Surely even the current landlord, pre-covid rent freeze, would have been within his rights to impose a rent increase?

 

[AlbacoreA]

...
. But what is the reason for been unable to increase the rent? Surely even the current landlord, pre-covid rent freeze, would have been within his rights to impose a rent increase?

Only the previous Landlord would know that. Personally in the past I've left the rent low for a good tenant, or where I was planning on selling a place. But the current way they implemented the RPZ means even if you aren't in a RPZ you'd have to act as if they may impose a RPZ anywhere at anytime. So now this means as a business you'd have to increase the rent to max the market will bear as often as you are allowed to. Because at any point rent could be frozen or stop completely and there is little you can do about it.

 

[elcato]

But what is the reason for been unable to increase the rent? Surely even the current landlord, pre-covid rent freeze, would have been within his rights to impose a rent increase?

I'm referring to the classic 'tenant agreement for life' that used to be common in the 80s and 90s. Maybe they don't exist anymore ? Having said that, why would the seller not just give the required notice and use the legit reason of selling to the tenant ? Something doesn't sit well tbh.

 

[NoRegretsCoyote]

But we have seen a reasonably priced one bed house and are thinking of taking a chance on it.

If you are a cash buyer and you have an offer accepted you could ask to see evidence of up-to-date rent payments.

The vendor might not want to share, at which point I would walk away.