Buying a house with tenants? Here's what you need to know

Depending on your plans for the property, having tenants in residence could be a bonus or an inconvenience. Either way, it may be helpful to know what your obligations and options are before you buy.

To help arm you with information on some of the key considerations, Canstar spoke to Kate Fuller, Senior Investment Manager at National Property Buyers, who shared some insights based on her years of experience advising buyers in situations like this.

Remember, this is general information and the exact circumstances, as well as the relevant rules and laws in your state or territory, could also influence how the process works and your obligations as the new owner. Consider speaking with a qualified professional if you need personalised advice.

How would someone find out if a property they are considering buying has existing tenants?

If the property is being marketed towards investors, an existing tenancy is often mentioned in the advertisement. The agent representing the sellers may also make prospective purchasers aware at open inspections or if the question is asked when buyers are inquiring about the property. The seller’s agent will generally be able to supply information relating to the lease, including the type of lease, regular rental amount, expiry date and any special conditions of the lease. A copy of the lease and extensions is generally also included in the vendor statement which is a document outlining certain details about the property that the buyer should be aware of before a sale is agreed.

If I buy a tenanted house, do I have to honour the existing lease?

The existing lease will generally need to be honoured. Depending on whether the lease is fixed term or periodic, this will determine what notice is to be given if you wish to gain vacant possession. There are times when the tenant may wish to vacate early and so therefore vacant possession of the property could be negotiated, however this cannot be enforced if they are in a lease.

What extra research should a buyer do before they commit?

We would suggest speaking with the agent – they often have access to the tenant history or can speak with the landlord or property manager involved to gain a better understanding of the current tenancy. If you are buying as an investor, it could be favourable to do some research into the area, the vacancy rates, median rental value and demographics. It could also be worthwhile finding out if the tenant is hoping to have their lease renewed (if expiring in the near future) as that could all be negotiated in-line with the purchase, bringing stability for the tenant and you as the buyer.

What happens to the tenant’s bond when a new buyer takes over ownership of the property?

The bond will have been lodged by the landlord or property manager with the relevant rental tenancy authority in your state or territory. If you take over a tenancy, the bond will stay in place but changes to ownership details and/or management will need to be provided to the relevant authority.

What will my immediate duties and responsibilities be once I buy a tenanted house?

After purchasing, many landlords choose to engage the services of a professional property manager. They will be able to take you through the process of managing the property from settlement, ensuring this stays smooth with minimal disruption to the tenant. If you wish to self-manage, you will need to advise whoever currently manages the property and arrange for copies of tenancy agreement, lease extensions, ingoing inspection, routine inspection, tenant ledger, manuals and keys to be collected upon settlement. You will also need to gain the contact details for the tenant and advise them on settlement of your contact details for any maintenance or ongoing queries, plus update them on details for rental payments. It could also be beneficial to take out landlord insurance to protect yourself, whether you’re self-managing or using a property manager.