Buying a tenanted property - wanting to move in

Discussion in 'The Buying & Selling Process' started by RiLoZo, 23rd Dec, 2020.

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  1. RiLoZo

    RiLoZo New Member

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    Hi all,
    I was after a bit of advice regarding purchasing a property which is currently leased until May 2021. We wouldn’t want it as an investment rather we would like to move in as soon as possible. Just wondering if any one knows about:
    - stamp duty (Queensland)
    - what the process is
    - anything to do with the banks such as mortgage repayments
    - how will it affect our tax
    - insurance
    - being a landlord/using property management
    - if there is any way the tenant could leave earlier without having to force them out
    - is it a good idea from hindsight

    This would be us buying our second house so I don’t think we would receive any grants etc
    If the tenants had to stay we wouldn’t be awful landlords, trying to get them to leave. We would rather keep things the way they are so everyone is happy.
    Any help/advice would be appreciated!
    Thank you in advance!
     
    RiLoZo, 23rd Dec, 2020
    #1
  2. wylie

    wylie Moderator Staff Member

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    As a vendor, we've waived the final four weeks of the tenant's lease if he left before settlement. We both signed this agreement, and it worked. He wanted to leave anyway as his circumstances had changed, but he held all the cards.

    As a buyer, you could ask the agent if the vendor is prepared to offer the tenant an incentive to leave early seeing they will be leaving in five months anyway.

    It seems to be a hot market now, but not everyone wants to buy a tenant with the property, so if your offer is good, the vendor might look at this.

    Otherwise I think you do pay higher stamp duty, but check this out with the OSR to be sure. You will always pay some capital gain if you settle with tenants in the house. If you stay long term, it will be a small percentage of the gain (worked on a time basis). Rented first six months, then you live in it for five years, you pay a portion of the capital gain pro-rata for the time it was rented. The longer you live in it, the less painful that tax will be. (This is not advice. Please confirm this with a professional.)
     
    wylie, 24th Dec, 2020
    #2
  3. Stoffo

    Stoffo Well-Known Member

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    Just agree to buy on the basis that settlement will occur upon vacant possession.

    That way it is the current owners responsibility to deal with the tenant, though most tenants will likely move early knowing they have to move/no chance of renewing the lease (unless they are paying very cheap rent).

    You might have to wait 3-5 months for settlement though !

    What are you doing with your existing property ?
     
    Stoffo, 24th Dec, 2020
    #3
    Archaon and thatbum like this.
  4. skater

    skater Well-Known Member

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    Like @Stoffo , I'd ask for vacant possession.
     
    skater, 26th Dec, 2020
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  5. Marg4000

    Marg4000 Well-Known Member

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    Just be aware that if you buy it tenanted, even for five months, you will be liable for some CGT when you come to sell.

    The amount may be minuscule, but you will have to keep records of expenditure for the whole time you own the property.

    As said, buy on a long contract with settlement including vacant possession after the lease expires.
     
    Marg4000, 26th Dec, 2020
    #5
  6. Angel

    Angel Well-Known Member

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    Do you want to move in at a particular time, eg your current rental lease expires on xxxx date? If you do, then you put Vacant Possession on the contract. The property manager/sales agency must give their tenants 60 days notice once your contract goes unconditional. We sold a few months ago with tenants in place and the company discussed it with the tenants and gave them tons of advance notice before it went on the market.

    As far as I know, the stamp duty payable on an owner occupied home is 50% of that payable for an investment property. This will be thousands of dollars so it may be in your best interests to purchase as an owner occupier. The tenants are not your responsibility.
     
    Angel, 26th Dec, 2020
    #6
  7. wylie

    wylie Moderator Staff Member

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    The tenants have the right to stay until the end of their lease though.

    So you've have to be prepared to have the vendor offer them some incentive to move out and then just don't settle until you do get vacant possession.
     
    wylie, 26th Dec, 2020
    #7
  8. Angel

    Angel Well-Known Member

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    If the vendor is selling it, then that is the vendor's concern. Our sale fell within the new Qld Covid regulations and all we had to do was give at least 60 days notice to vacate and leave it up to our agents to deal with.
     
    Angel, 27th Dec, 2020
    #8
  9. wylie

    wylie Moderator Staff Member

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    Interesting. A lease is a lease though, and takes precedence over anything else. You cannot give a tenant notice to leave because you are selling (in Queensland anyway), unless something has changed.

    I would certainly put "vacant possession" into the contract, but be prepared to wait out the end of the lease if the tenants refuse to leave, or refuse to be bought out.
     
    wylie, 27th Dec, 2020
    #9