Before You Buy Investment Property

Topic: Rental Property Investment Strategies
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• You have been looking to buy a rental property and have found a perfect property.
• Next, sometime between the time your offer is accepted and the time you officially close on the building, gather as much information as possible on the tenants, their rental agreements and how the property will be turned over at closing.
• Write a letter to the seller letting them know what specific information you need before you close. They will need time to gather documents, so give them advance notice. If possible, set an appointment to sit down in person to ask questions and get additional information. The following are great to ask about:
• Copies of all rental records for their current tenants. You can check these for the rent amount, the length of the rental agreement and any past problems with late payments.
• A list of security deposits you will inherit, and an outline of last month’s rent and other deposits the seller is holding for the tenants.
• A list of everything to be included in the sale: appliances, lawn maintenance equipment, window treatments, etc. You must know what your purchase price includes since you are buying the rental property.
• Copies of all service contracts, licenses and warranties regarding the property and its contents.
• Tax statements for the property.
• Any current insurance policies.
• Copies of the latest bill for each utility. This will help you estimate expenses and make it easier to switch the utilities to your name.
• After reviewing the documents, talk to the tenants. Ask the seller to let them know you will be calling. Try to reach each one by phone in the evening when they are likely to be home. Introduce yourself as the buyer of the rental property and ask if they have time to talk to you. If they do not have time, then reschedule. You want to find out:
• If the information you received is accurate regarding the security deposit, last month’s rent and other deposits. Review their lease terms as well.
• If they have any maintenance or repair issues needing to be addressed. Remember, you are going to pay for them if the current owner does not fix them first!
• What, if anything, they would change about their home or their agreement. Do not make any promises, but find out how you might entice them to stay when you implement your own lease.
• Try to interview tenants in every unit. Note how willing they are to talk to you. It is not essential that you reach everyone, but you will want to know if you have a tenant who is uncooperative. As the buyer of the rental property you will want keep an eye on uncooperative tenants once you take ownership.