The ins and outs of buying investment property with existing tenants

If you’re lucky enough to buy an investment property with tenants already living in it, you’ll benefit from immediate rental income from the date the property settles, also saving you the hassle and costs of finding appropriate tenants and a property manager.

There are however some downsides and things you need to be aware of when buying a property with existing tenants.

Firstly, just because the property has changed owners, doesn’t mean the lease contract is voided. Sometimes there is a special clause that makes this so but it’s very rare. Generally, as a buyer, you are bound by law to honour the existing lease.

This shouldn’t usually be a problem, if the existing tenants have been there for a good length of time and the property has been well looked after then you can assume the tenants have had a good relationship with the property manager in the past and should continue to do so with you.

However if for some reason you do find the existing tenants unsuitable or you’re not happy with them, you still have to honour the contract on the lease.

If you have a good reason for wanting to break the lease such as late rental payments you can issue a fair notice or reason to terminate the contract in 14 days.

You can also end a lease contract early if you have written agreement from the tenants.

Also, if you are hoping to move into the property yourself or would like to get new tenants in, you must give the existing tenants ample notice that you do not intend to renew the lease once it expires. This can up to 90 days in some states so be mindful of that.

One thing to keep an eye on is that on occasion sellers try to sell a property right after signing on new tenants and low rental rates to give uninformed buyers the impression that the home is highly desirable rent-wise. So before buying a property with existing tenants find out how much rent is currently being charged because if it’s too low for your liking you won’t be able to raise it during a fixed term.


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