Should I Start renting process before closing?

Question

Any advice on starting to look for tenants before you have closed on property?

Best practices?

Start advertising? screening / showing, etc

Thanks

James Wise · Answer

@Jack Johnson I would avoid it for several reasons.

• Do you have permission to do so? Remember, at this point you are not the owner and the current owner likely won't be comfortable with you bringing multiple parties through the property. This leaves the current owner open to liability with no benefit to him.
• There are always delays in closing. You do not want to get in the position where a tenant has paid a deposit and terminated their old lease only to find out that the house you promised them is not available on the agreed upon date. We can take it even further, what if for some reason the deal doesn't close? Then what would you do with that tenant?
• Sometimes during the process of moving out sellers damage the properties. You may have a timely repair on your hands and won't have the unit ready in time for the tenant.

Mike Cumbie · Answer

Hi @Jack Johnson,

I think each situation is different and having open communication with the seller is the best bet. If they do not want you to then the best bet is not to. For instance if they have a tenant occupying an apartment you plan on kicking out and renting.... well if something fails they end up holding the bag and lose a tenant. You get to walk away but now they have an empty apartment.

Generally speaking if I was the owner I wouldn't want you on the property talking to tenants, bringing in contractors, having property managers walking around until you own it. From their perspective nothing good can come of it. Either you still buy at the price (you are happy) or you find something out that makes you want to back out or lower the price (prospective tenants tell you it is way too high and the one down the street is better, the contractor points out a problem, property manager tells you why he is going to charge you more etc).

Just my thoughts and good luck!

Michael Seeker · Answer

Hey @Jack Johnson - I have advertised properties for rent in the past prior to closing just to see what sort of interest there would be at a certain rent level. You could certainly advertise a few days ahead of closing and schedule showings after closing. I don't think it makes sense to show the property or screen tenants. For one, you don't own the property and would need to coordinate everything with the seller/seller's agent. I don't know the laws around collecting a screening fee on a property you don't own, but I suspect that would put you in murky water as well.

You may be able to do what you're suggesting with no issues, but I think it's a much better approach to wait until you own the property before doing anything with/to it.

Allen Clark · Answer

I did this once. I bought the place as a private sale and the seller was aware that I was doing it. I also let any prospective tenants know that I did not actually own the house yet and the expected closing date was x. I did mention it to my lawyer and she said I was fine.

If the deal fell through then I planned to refund any fees I had collected.

Jeff Rabinowitz · Answer

I once had several rental homes quite near each other. I didn't advertise the new purchase but, I believe, a prospective tenant viewed another property that was rented to another applicant and wanted to know if I had others. I knew the house I was set to purchase was in immaculate condition (it had never been a rental and was very well maintained). I took the prospective tenant with me on my pre-closing walk through. They signed the lease the next day.

Rod F. Hatefi · Answer

You may be opening yourself up to liability from a prospective or future tenant and by the current owner. I may be too conservative, but you really ought to have possession before advertising or committing the property to a leasehold. This means waiting to have the walk-thru, recording the grant deed and getting the keys to your new rental ... Congrats!

Andy D. · Answer

The only time I advertised a property that was not yet mine was when I bought it from the developer who had just finished building it. And even then I had seen the unit and knew what needed to be done to get it ready for renting it out. And it was, obviously, uninhabited.

Unless you are absolutely certain that the place is "rent-out ready" I would not advertise it (with what kind of pictures would you do that anyway?), not to mention do anything beyond that. If the owner tracks his property this could backfire.

Either way, you want to communicate about this with the owner. If he owner-occupies and the unit is basically empty because he already packed up all his stuff then he might not have an issue with you coming in and taking pictures to use for advertising (he is, after all, trying to sell the place to you and wants to get rid of it). However, if he's in the process of packing and moving, heck, I wouldn't want anyone jumping around my place during that time taking pictures of that mess to then post it online! No, Sir! And the same applies if the unit is rented - do not bother the tenants! And in addition there's the questions, in that case, why you would need to advertise if it's already rented.

So in short: depends on the individual situation (as always) and generally I'd say, don't do it and if at all only a few days prior to scheduled closing.

Bryan O. · Answer

Hi @Jack Johnson. The only thing I would do is advertise. Set showings a few days after the closing date. Even then I would be cautious because there are likely things that you want to repair or improve. Showing a unit in non-move in condition does more harm than good.

Do not try and do anything while you are not the owner. Your financing may fall through or something else could kill the deal. You aren't the owner, so don't act like it  ;)

Should I Start renting process before closing?

Most Popular Reply