Buying a house with tenants in place

Bargain_Hound

Looking at several houses at the moment, it seems common enough for tenants (renting) to be sold with the property.

One property in particular I'm curious about is a receiver sale with 4 tenants in place. Estate agent didn't know much details whether current tenants are actually paying rent currently and to whom but tenants are living there approx 3-4 years.

What is the legal stance of the tenants upon a successful sale, Can they be evicted ?
Is this going down a dangerous road even considering this property? (Due to both receiver sale & tenants in place)

GingerLily

Are you a cash buyer?

Bargain_Hound

GingerLily wrote: »

Are you a cash buyer?

Unfortunately not, first time buyer, looking for small family home and not to let.

Samuel T. Cogley

Most banks won't lend without vacant possession. It's actually pretty unusual for tenants to be in place.

I would probably assume that if the reciver has not evicted them prior to sale - which would mean the property would fetch a higher price - something is afoot.

pwurple

Hmm. I'd steer clear. I have 5 lovely anecdotes about people I know who bought property with tenants in place. Every one of them lost the shirts off their back to the legal profession with problems afterwards. 

Actually, if investment is what you are trying to do, consider your pension, or buying shares or an investment pack rather than property. The govt is doing so much meddling... laws are changing every single year regarding property. It's too volatile. 

And I'm saying that as a landlord with several properties. We are getting out of the residential sector. Converting to commercial. There's no income in it. I've a family to feed.

Bargain_Hound

Samuel T. Cogley wrote: »

Most banks won't lend without vacant possession. It's actually pretty unusual for tenants to be in place.

I would probably assume that if the reciver has not evicted them prior to sale - which would mean the property would fetch a higher price - something is afoot.

Something really does seem afoot. Tenants (4 seperate couples) were also present during viewing, seemed overly pleasant considering the circumstance. Also a lack of transparency from the EA, my gut feeling initially told me this isn't going to be straight forward.

pwurple

Ah, I see you are looking to move in. 
I would say talk to your solicitor first off for advice.

izzyflusky

I've viewed 2 properties with tenants in place. One of them in particular the trnant was overholding a week, would actively ignore the EA, had the place in bits (we had to jump over stuff to get through the main door). A pity because the property was nice enough, just not what we were looking for. However, the advertised price was not any lower than similar houses in the area and there was already an offer in apparently.

I also viewed another property with tenants in, giving people looks while the viewing was going on. Not nice at all. This one was also in receivership. There was an offer in the very next day so people must not be thinking about the implications when putting in offers.

Samuel T. Cogley

Could be cash buyers looking for investment properties.

dennyk

You'd never get a normal mortgage on a property without vacant possession. Anyone buying a place with a tenant in situ is almost certainly going to be an investor looking for a deal on cheap property/land and buying with cash. In a few cases it might be an investor looking for immediate cash flow from a good sitting tenant, but since residential properties aren't often sold with tenants in possession unless there's some sort of issue with getting them out (since a vacant property is open to many more buyers and will almost always fetch a higher price), and tenants the seller can't get out are often tenants who don't pay rent or who are in the process of ransacking the place down to the studs and whatever plumbing bits aren't made of copper, that's probably a lot less common.

Mickiemcfist

pwurple wrote: »

Hmm. I'd steer clear. I have 5 lovely anecdotes about people I know who bought property with tenants in place. Every one of them lost the shirts off their back to the legal profession with problems afterwards. 

Actually, if investment is what you are trying to do, consider your pension, or buying shares or an investment pack rather than property. The govt is doing so much meddling... laws are changing every single year regarding property. It's too volatile. 

And I'm saying that as a landlord with several properties. We are getting out of the residential sector. Converting to commercial. There's no income in it. I've a family to feed.

I agree there are many pitfalls to it, having said that there aren't many banks giving low interest loans for REIT investments or pension payments, it's why so many non-typical investors end up being property investors.

the_syco

Bargain_Hound wrote: »

What is the legal stance of the tenants upon a successful sale, Can they be evicted ?
Is this going down a dangerous road even considering this property? (Due to both receiver sale & tenants in place)

Look at it this way;
There are tenants in the property.
Seller gets more if property is empty.
There are tenants in the property.
After buying the property, you'll need to go through the process of evicting them.
When they are gone, what you bought may not be what you get, as the tenants may leave with stuff, and/or have wrecked the place already.

The_Conductor

dennyk wrote: »

You'd never get a normal mortgage on a property without vacant possession. Anyone buying a place with a tenant in situ is almost certainly going to be an investor looking for a deal on cheap property/land and buying with cash. In a few cases it might be an investor looking for immediate cash flow from a good sitting tenant, but since residential properties aren't often sold with tenants in possession unless there's some sort of issue with getting them out (since a vacant property is open to many more buyers and will almost always fetch a higher price), and tenants the seller can't get out are often tenants who don't pay rent or who are in the process of ransacking the place down to the studs and whatever plumbing bits aren't made of copper, that's probably a lot less common.

Talk to any reputable solicitor in a practice with any scale at all- and they will regale you with stories about how many first time buyers are desperately trying to evict tenants after buying properties- and if its in the Dublin area- how many of those buyers have had to report to the local authority as homeless............

There are very few investors out there buying property anymore- other than REITS etc- and they're not interested in one-off properties- they want groups of houses- or blocks of apartments.

Your picture of investors or prospective investors buying property with tenants in situ- is quite simply not supported by the number of cases from FTBs- that are featuring more and more at the RTB and at District courts..........

Spark Plug

If in a rent pressure zone investors prefer to acquire with vacant possession otherwise rental growth restricted by 4% cap unless tenants in situ are paying rents in excess of market rates

Samuel T. Cogley

Spark Plug wrote: »

If in a rent pressure zone investors prefer to acquire with vacant possession otherwise rental growth restricted by 4% cap unless tenants in situ are paying rents in excess of market rates

The 4% still applies between tenancies. That said the situation on the ground and all that...

dennyk

The_Conductor wrote: »

Talk to any reputable solicitor in a practice with any scale at all- and they will regale you with stories about how many first time buyers are desperately trying to evict tenants after buying properties- and if its in the Dublin area- how many of those buyers have had to report to the local authority as homeless............

I'm surprised so many are able to complete their financing as a FTB without vacant possession. Are these folks somehow paying cash, or are the people in the lending chain not doing their due diligence (deliberately or otherwise)?

Spark Plug

Samuel T. Cogley wrote: »

The 4% still applies between tenancies. That said the situation on the ground and all that...

That’s true only way around it a first letting like buying an entire block off a developer or a place in need of refurb. Having lettings subject to 4% at rents significantly below market plays havoc with the investment valuation

murphaph

Samuel T. Cogley wrote: »

The 4% still applies between tenancies. That said the situation on the ground and all that...

Yeah one look on daft shows RPZ limits go out the window for new lettings. There's simply no way to reliably enforce it.