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Choosing the property

Buying tenanted property

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In the old days, few investor landlords would consider buying a tenanted property because of the problems associated with evicting a sitting tenant. Although such properties seemed cheap, they were usually in a terrible state of disrepair, and the rents were often fixed at ridiculously low levels, such as £10 a week. The idea of buying a property containing an unevictable, low-rent tenant filled most budding landlords with absolute horror, so investors began to insist on only buying properties with "vacant possession".

But things change…Over the last several years, estate agencies have begun selling properties from one landlord to another landlord. Nothing strange about this, apart from the fact that the property comes complete with tenants, who remain in the property even though the owner changes. To start with, this only really occurred with high value properties in the centre of London. However, as time has gone on, more and more investors are beginning to consider this as a viable option. It can be a relatively painless way of becoming a landlord, and long-term, the investment is unlikely to fail.

The main plus is that you are buying a property that has proved its lettability. All of the doubt about whether tenants will consider the property to be a suitable home is removed. You are buying the property with tenants that are keen to stay on, and a happy tenant is often the easiest type of tenant to please.

There is no rental void and you receive the current market rent from the day of purchase. This is one of the most important factors in making a success of your investment, and also has the added benefit of allowing you to claim tax relief right away.

A further benefit is that you also get to see how the tenant lives. If you view the property on a couple of occasions, you will become aware of the state that the property is kept in. Admittedly, the tenants will probably have been asked to be on their best behaviour and make sure that the property is spick and span, but nonetheless you get something of an insight.

Normally, you would also take over the fixtures, furniture and fittings, which are included in the asking price. This means that your setting up costs are reduced. It also usually means that there is an inventory, which can be transferred to you. You should also get a property that is furnished with equipment, appliances and furniture that already comply with up to date safety laws.

If you decide that you want rid of the tenant after all then you shouldn't have any problems. The tenant is not a sitting one, as under previous legislation. They are in fact governed by the type of tenancy agreed with the previous landlord - usually an assured shorthold tenancy, which normally means you can have them out in two months, if you so desire.

The rental yield on tenanted properties seems to be slightly lower than on properties sold with vacant possession. In fact the average yield is a couple of percentage points below the ten percent that many investors set as a floor minimum for the target yield on the property.

Although this new way of buying tenanted properties can make sense, investors should still beware of buying any property containing sitting tenants who were in place before the current Housing Acts became law.

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