Buying Tenant Occupied RE

[Eduardo A.]

Hello, I am a newbie and I have been reading this forum and others. I will be buying my first property soon but recently I have seen a few tenant occupied properties and these look like a good first deal for a newbie. No rehab & immediate cash flow BUT I wanted to get some thoughts on this from the board.

[Stefan Forsberg]

Hi Eduardo,

Welcome to BP, there is a lot of experienced people on here so I am sure more people will chime in soon.

I have one rental that I bought fixed up and put my own tenants in. If the deal is right from a cash-flow perspective I would say go ahead. You just have to make sure that you consider a few things..

1. Get a copy of the signed lease so you can familiarize yourself with the terms and conditions (If there is no lease I would not buy).

2. Make sure that the previous owner gives you the security deposit the tenants put down when they moved in, in some states you will have to have this deposit in a separate bank account from your own.

Learn the tenant/landlord laws for your state.

As far as cash-flow is concerned, do a search for the 50% rule here. In short it means that 50% of the gross rent goes to operating expenses (taxes, insurance, repairs, legal fees, evictions, etc.) the other 50% should cover your profit plus the Principal and Interest on any loan you have on the property.