While many of the closings you work on as a Realtor involve owner-occupied properties (and you know exactly what to do), do you know how to approach one that is tenant-occupied? In situations where a property is tenant-occupied and the tenant will remain in the property after closing, the contract must be handled a certain way to ensure that your client, whether it’s the buyer or seller, is protected throughout the transaction (and after closing). This article will touch on some of the more important aspects from contract to close when a tenant will remain in the property after closing. 

What Every Selling Agent Must Put In The Contract

Many of you have handled a transaction involving an investment property. And as you know there are a number of contract issues that you must address that are not involved with the closing of a primary residence. I wanted to use this post to put all of those issues into one article. Now every deal is different, but the issues below are fairly common for any occupied investment property.

The Lease

You should include a requirement in the contract that the seller will provide a full copy of the lease within three days of the Binding Agreement Date. Why is this so important? Your client needs to make sure he or she is comfortable with the terms of the lease (i.e., rental rate, lease term, etc.). At closing the lease will be assigned from the seller to the buyer effectively making the buyer the new landlord. If the lease terms are not favorable based on your client’s investment goals you will want to make this determination during due diligence so your client can terminate the contract.

One of the most frequently asked questions I get as a real estate and estate planning attorney is: Should I transfer my investment rental property into a limited liability company (LLC)? The answer is very simple. YES! Why you ask? If you own a rental property in your individual name and someone is seriously injured on the property, many of your personal assets are exposed. In other words, a lot of what you have worked for your entire life could be taken away in an instant if you are sued in your individual name and found liable. By having the rental property in an LLC, your personal assets are protected.