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Thinking to buy a tenanted investment property. There are some risks that you need to be aware.

There are many benefits to buying an investment property that already has a tenant, as well as some of the risks that you need to be aware. The followings show how to minimise them.

Purchasing an investment property that already has tenant means you can start collecting rent from day one, with no vacant period and no lease fees to find a new tenant. The lease will carry on as it did before you purchased the property. Sound great, right? There are some possible issues you might need to be aware of though.

It is critical to check whether the lease on your prospective investment is current or the tenants are on an expired contract. If the tenants are off-lease, they can give a short period of notice and vacate the property, so those benefit mentioned above could be no longer available.

On the other side, if the tenants are on current lease term, it offers security and its also mean that you are stuck with the lease and its conditions, such as the current rental return and the tenants.

There are steps you can take to minimise your risk: • Make sure the bond has lodged properly. Your agent can arrange for the bond guarantee to be transferred into your name on the settlement.

• Check the property condition report and making sure that is it a complete and accurate record of the property as you inspected it.

• Make sure there are no rental arrears. If there are, or if a landlord has agreed that rental arrears can be taken out of bond payment, stipulate that this amount is deducted from the purchase settlement amount.

• Asking the leasing agent about the tenants and their payment history. When attending the open inspections will give you a sense of how the tenants live in the property. If possible, sight the tenant’s original application for the property and rental ledger.

• Check at the yield for rental properties in the area and compare them to yours. You will not be able to increase the rent until the end of the lease.

• Be aware of any concessions or conditions that are either in the lease contract or have been agreed with the landlord or property manager because that will become your responsibility once you bought the property. For example, does the rent include electricity or other utilities? Has the landlord agreed to install a new oven or paint a room?

If you like the property and the location but you have doubts about the tenants, the lease or the managing agent, you can quickly change the leasing agent when you settle the property. You can also make vacant possession of the property a condition of a settlement but you may need to wait until the lease expires to before settlement of the property, but you aren’t taking any problems and responsibilities the previous landlord has.

If your only problem with a tenanted property is the rental yield, please keep in mind that increasing rent on a good, long-term tenant may well drive them away. Please do your calculation whether the amount that you would like to raise the rent compare an excellent long-term tenant, lease fee plus any rent lost if your property is vacant for a few weeks.

Please come and talk to Kevin Poh on 0415820016 and he could help you finance your investment.

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