If you are a new real estate investor, it is natural for you to feel attracted to properties that are claimed by owners as 100% occupied. It means that you will start earning full rental income after buying the property without making any effort. This is because of the inherited tenants who are already present in the property. All investors find this promise form the seller’s agent just like music to their ears. After all, you are not required to wait and make efforts to make the property tenant ready. There are tenants already and they will simply start to pay their monthly rents to you instead of the previous owner, right? Wrong.
Too good to be true
Howsoever sweet the promise of 100% occupied sounds, it is not always true. If the rental property is full of tenants and it is generating positive cash flow for the owner, why would he be selling it and that too for a low price? You should always be suspicious whenever you hear this claim of 100% occupied from the seller. Compare it to a situation where a product is claimed to be very high quality and yet it is being offered at the lowest price in the market. Doesn’t it sound too good to be true?
It is a ploy to force you into buying
Promising the buyer that he will get a property inhabited by tenants makes it easier for the seller. Buyer begins to think that he will not have to work hard to make changes in the property as it already has 100% tenants. He just needs to close the deal and start earning high rental income. He thinks it is great as he will not need to advertise the property to attract new tenants. There will be no showings and no efforts in singing new lease agreements with tenants. The biggest benefit of buying a 100% occupied property is the savings in terms of making the property rent ready for the potential tenants.
Things do not turn out as promised by the seller. It may be right that all the units of the property are currently occupied but how do you know that more than half of the tenants are those who have been permitted to live inside the property without paying any rent? You have not checked the lease agreements of individual tenants, have you? You have no way to tell if some of the tenants are those who have very poor credit scores and those who got evicted by their landlords’ only weeks ago.
If you think no one dares to cheat the buyer in this manner, just check out the facts with fellow investors. They will recount the horror stories of other investors who got duped and purchased poor properties just because they believed they were 100% occupied.
Check out the real situation
You need to check the database of all the tenants before agreeing to buy a property. Of course it sounds like hard work but you have no other option if you do not want to be cheated by an unscrupulous seller. You need to keep your eyes and ears open when buying a property. Do not go by the word of the seller or his broker as they would do anything to make sure you buy the property. Indulging in due diligence before buying a property is much better than finding out later that most of the tenants in your property are either poor quality or squatters. The most horrifying part of such tenants is the fact that they would not be paying any rent to you. You will have to work hard to forcefully evict these tenants. They might even damage your property badly before leaving the premises.
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