I don't think it would hurt to ask some questions if you really like it. The range of tenants is just like people who own in terms of care and upkeep. Talk to the owner, express your concerns. Heck, maybe he can ask his tenant if you can buy him out with a couple months rent or something.

I definitely would only consider buying the house if the contract stated that the house will be empty at time of closing. If you purchase with the present tenant occupying, there is a chance that you would have to go through an eviction. This can get very messy depending on where you are. I've seen tenants dig in their heels forcing an eviction suit. No rent gets paid during the suit, the property gets damamged and the tenants can file a counter-suit which means you will have to defend yourself. Not a great way to start out. You could spend in very bad cases, $10,000-$20,000 (unusual to be this high).
You should also have some kind of language in the contract that allows for an inspection before closing with a loophole to let you out of the contract if the property is damaged.

Go with an option. Worse case is that you lose your option money if you decide not to purchase.

Tricia

I was just researching this because we are buying a house soon with the intention of renting it out. I found that it's common in many states for the new owner to be required to honor the lease. But if the lease will be up before it's listed again then he can make them month to month. Then he can deal with having them move himself. You could view the house before they move out (tenants have a right to a certain amount of notice) and then maybe you can ask in you purchase agreement that there is no additional damage before closing with a pre-closing inspection. I would drive by and see how they are taking care of the outside. It may tell you something about how they are treating the house. When I was younger and rented I never did any damage to a rental that I haven't done to my own home, with the exception that I used to spill my drinks constantly! I was a super clutz and it wasn't intentional. Now that I'm older I just don't have that problem anymore, strange.

States laws vary regarding leases. However, if the lease was recorded then it has priority over a subsequent Warranty Deed (or any other transference). A new owner would take title "subject to" the leasehold interest. We've rented twice & recorded our lease both times to protect our interests.

In some states (but not all), a lease has priority even if not recorded. So, it's a good thing to check public records if considering purchasing property with a leasehold interest.

Tricia

DH and I own now, but we used to rent. We briefly talked about purchasing the last house we rented. It had been a one owner home for about 25 years until the owners died (one in the house). The son had rented it out for a few years, but he only chose good renters and kept the place in good repair. If we would have wanted to continue living in that city, we might have purchased it and then used it as a rental when we were ready to move up.

I think you can work around any obstacles by putting it in your contract.

In the original post they stated that they were interested in making an offer with a closing date to co-incide with the natural expiration of the rental lease agreement.

In this circumstance there would be no evictions required. Once a rental lease naturally expires the tenant has no legal right to hold over in tenancy and a landlord is under no legal obligation to renew a lease.

Some food for thought:

1. Is this house such a great deal and so perfect for your family that you are willing to wait nearly a year for closing? My thought, based on some of your other posts, is that your market has a lot of inventory. Surely there is something else out there?

2. What if interests rates were to rise to a point that the house is no longer affordable for you? Set a maximum rate in the contract.

3. Although the lease might expire, what if the tenants decide to become "squatters" and refuse to move? It happens. Someone is going to have to pay to get them out of there. Recently I sold a house that had tenants. We set the closing date for after the lease expiration. (It was about 90 days out.) We required a copy of the notice sent to them regarding the non-renewal of the lease. Also required that all personal belongings be removed from the house and yard. My clients were fully prepared to not close on the house until these very nasty tenants were gone! I was also prepared to demand money be held in escrow if all the garbage was not removed from the house. (This was truly one of the filthiest houses I have seen, and living in a town with lots of rentals I've sent a lot of trashed homes.)

4. View the house again with the owner. Take lots of photos, and write a detailed description of rooms, current damage, etc. That way you both are working from the same page when it comes to possible tenant damage and issues of condition.

5. You might consider two home inspections: one now and one a month or so before the closing. Lots can change in a house in a year.

6. What if in the next year you find something you like better? Include some sort of clause to cover this situation.

6. Best idea stated above: get the owner to buy the tenants out of their lease early.

Frankly, this is probably not something I would do. Too much risk for me.

"However, if the lease was recorded then it has priority over a subsequent Warranty Deed (or any other transference). "

The lease doe not have to be recorded (filed at the court house).
It is an encumbrance on the property that MUST be honored by a subsequent purchaser.

Make sure the place is vacant.
Most leases revert to month-to-month after the initial lease period (it is written in the lease and the it is law in many places.
This means the owner must give the requisite notice (usually 30 days in residential) or the notice provided for in the lease (if it is longer).

First of all, you don't even know if the current renter is on a year lease, 6-month lease, or maybe even month-to-month.

Contact the owner and even give a rough informal offer and inquire about closing in 3 months. Maybe current renters can leave by then per the current terms of lease. And, if not, then maybe owner can offer the tenant a set dollar amt to leave before the lease is expired.

But what you can have on your hands here - is - if the owner offers a deal to the renters, and then for some reason your loan does not get approved, then the owner is stuck with no buyer and no renter. You need to give some kind of consideration (lump sum) in the contract if this was to occur. It just isn't fair to the owner IF owner breaks lease to work with you.

Maybe you can get loan approval, appraisal and all those things before the owner approaches the renter with a "deal" to move sooner (assuming lease expiration is far out.)

Trust me on this one...the owner wants to sell...the owner will be happy to hear from you...to owner will work something out with you.

**Lots of rental homes come out if great shape after the renters move out. I bet the landlord made sure that the current renters would take care of the place because landlord knew a sale would be occurring after these renters moved out.

EVEN IF the renter is schedualed to be out by the time of the purchase DO NOT assume they will be gone. Get it in writting or be prepared to play the he said, they said game in court!
When it comes to rentals NEVER assume anything! Depending what state you are in the renters/occupant can have more rights than the actual owners.

I know the lease is honored in the event of a sale in my state. And I've heard the horror stories of trying to evict tenants, so we'd have no intentions of closing until the tenants were out AND I had a walk through. My concern is more like rrah said. What if they don't want to leave after the lease is up or trash the place on their way out in their anger? Then I'll have waited all this time for nothing (assuming the damage is more than seller/buyer want to pay for). I'm wondering if this happens more often than not or am I being paranoid? This house is a starter to mid-priced house, near a university. The cars out front lead me to believe it's a couple people (or more) in their 20s, low to middle class income.

Sweet Tea, I'm pretty sure it's a 1 year lease. I called the realtor shortly after the listing showed up "cancelled" on the MLS and she said the place was "being rented for a year, then the owner will relist it." So the lease is up March 1, 2008. So why do you think he'd be so happy to hear from me? Seems like he's got the upper hand with renters in place and no immediate need to sell anymore, no loss to him, so he could probably dictate his price.

Rrah, yes, this home IS rather unique. I've been looking at listings for three months, covering multiple zip codes (a good 10 square miles or more), toured 25+ homes, and only 1 or 2 other houses have come CLOSE. This one takes the cake, has everything we need PLUS 3 major $$ things we desire. Plus, it is in a very secluded and tucked away neighborhood we have come to love (the same neighborhood I mailed 42 letters out to homeowners last week, asking if they'd consider selling!). There just isn't much that's good in our low price range and if we could save the realtor's costs, this house would probably still be affordable to us, even after the price hits we're taking on our own house (yes, I'm hoping that he only had a 90 day expiration clause with the old realtor). It could potentially be a win-win situation for this owner (who had it on the market for 9 months before it got rented) and us.

Also, this owner is out of state, so I'm not sure how that influences things.

So if I did send a letter, do you think I should mention anything about the rental? I'm concerned if I don't, he'll just toss it aside and say "oh well, can't sell it since it's rented right now." I don't exactly want to say up front that I'm willing to wait, but what if I say I know it's rented, so if he's even interested in selling, does he have any ideas, calle me and discuss, etc?

juliebatt,
Yes, I would & did just that in 1974. A home was for sale with tenants residing. Took a tour while the folks were having dinner & felt for them as apparently owner said he would not sell the house. They were on a month to month basis, so gave them the time they needed to move. Owner was going thru divorce, so it was win-win for seller & buyer but sad for tenants.

Very likely you could look at the home & make your intentions known upon current conditions. Idea of pics is a good one.

Before too long I intend to sell a condo I have leased to tenants for 7yrs. However, I will be doing some updating & living there for 2yrs to avoid capital gains. I would hope that buyers would take a look at my FSBO as it is currently very nice even though it is & has been a rental.
Sharlee

The owner will be glad to hear from you because this owner is already planning ahead (watching the market, etc) on seling the home in early 2008 - or possibly sooner.

Often, renters want out of a lease before the year is up. Oten the lanlord will let them go if the landlord has plans for other renters or to sell soon. So in this case, who knows, the renters could be losing a roommate and could have already inquired about moving before the year lease is expired.

if the landlord took the home off the market because it could not sell, then this landlord really does want to sell, just could not do so because did not want to leave it vacant any longer. So if landlord knows there is a sale that is going to happen and landlord can work a deal where there are no vacancy months, then landlord will be ecstatic.