I recently bought a duplex and had it rented before closing the deal. I put a clause in the contract that was an “out” for me on it, but as we got close to closing I got very nervous about the situation. It worked out well for me, but I don’t think I want to do this again.
Do you try to have it rented with a deposit and contract before closing or maybe just advertised with a waiting list?
You cannot legally rent something that you do not own or otherwise have the owners permission in writing. You are opening yourself up for a lawsuit that you will not be able to win. Waiting list is ok and that is what I do.
Redhawk
Maybe I misspoke a little bit. I entered a contract to purchase in May, and had a rental contract for the tenant to move in July 1. I closed on the purchase at the end of June.
He didn’t move in until I closed, but I had a rental contract for it and he moved in right away.
Does this change what you said?
I always go in and do a few things prior to renting out the property. I’ve yet to have any property sit vacant for very long after it was made to be rent ready so I don’t worry about renting it prior to closing the deal. You never know what might happen where a property won’t close.
In a word NO, it does not change anything. If for any reason the deal does not close, you could be sued for breach of contract with your renter. I have put renters on the waiting list, I have taken deposits to hold properties for individuals with the understanding,in writing, that when I close and have control of the property I will rent to them, and if they decide not to rent at that time they loose their deposit. In no way will I sign a rental agreement on a property that I do not own. The rental agreement would be viewed by a judge as invalid, because at the time of signing you did not own the property, which is public record,in an eviction you would be at the mercy of the judge. In today’s world that is not what I want for my business.
Redhawk
Things fall out of escrow really easily. Escrows very often run longer than anticipated.
If your potential tenant has a contract with you, they give their 30 notice to move, pack their things, rent a moving truck…
If that house isn’t open and ready for them to move into, it’s not just that they will be unhappy. You will have cost them a large amount of money.
I’ve yet to purchase a house that didn’t need some sort of maintenance, repairs, cleaning. Even houses that look 100% turn out to need some sort of work. So I close escrow and go over the house with the fine toothed comb before I show it to potential renters.
With escrow, it’ never over until it is over. I had one fall out of escrow as everyone was in the office to sign the final papers. That’s at the very last possible hour.