Most homes on the market are owner-occupied, but that’s not always the case. In recent years, many home owners ended up renting out their homes when they could not sell but needed to move elsewhere. Now that the market is shifting, many of those accidental landlords are looking to sell. At first glance, buying a home that’s been rented out by the current owner may not appear different from buying any other home, but there are some potential issues to keep in mind.
1) Check the overall condition.
Some rental homes are in terrific shape: The renters have kept up with maintenance and have even made improvements such as fresh paint. In other cases, the rental hasn’t received much love. Because the home isn’t truly their own, some renters can be rough on a rental. Also, renters may not notice or report some of the maintenance issues that an owner would readily pick up on and address. A rented home may have additional wear and tear, especially if it has been used as a rental for many years and through multiple tenancies. Ask your insurance agent to check the history of past insurance claims on the property
2) How’s the neighborhood?
Factor in the neighborhood: Are the surrounding homes mostly rentals? Is the neighborhood mostly single-family homes or a mix of multi-rental units along with other homes? Owner-occupied neighborhoods can be better protected against possible market-value fluctuations. Also look at the appearance of other homes on the street. Do they have well-tended yards? How does the condition of the home you are looking at compare? If the home you are interested in compares poorly with others in the area, that may help you strike a better deal.
3) Is it occupied?
If there are tenants, tour while they aren’t home. While a tenant can be a source of information about a home, they may not want to move and may try to prevent the sale by complaining about the property. Look for signs of obvious damage, holes in the walls, stained or ripped carpeting, damaged flooring, leaky faucets, and mold. Be sure to check out all rooms and the basement, garage, or attic. You can tell a lot about how the home has been maintained by looking at how the tenants are living in the property
4) Is it unoccupied?
If a home has been unoccupied for a while, find out for how long. Sometimes — although less common lately — these homes are listed at a reduced price. Unoccupied homes may have lacked attention and may need repairs or basic maintenance. If the home was unoccupied and the utilities have been turned off, that may prevent a prospective purchaser from doing a thorough home inspection. Depending on the area, sometimes utilities can be turned on temporarily, but it often requires putting the utilities in the prospective buyer’s name. Vacant homes can also have broken pipes, leaky roofs, mold or damage from pests, so a thorough inspection is vital.
Check the HVAC and get a home warranty. Being a rental sometimes the air conditioning filter was probably not changed, and that is the worst thing for the system. Your home inspection will alert you to any repairs the home may need before you move in, and it can give you bargaining power if there are potential issues.