Property buyers planning to be owner-occupiers will usually prefer their new home to be untenanted.

However, in today's tough market and with cash rates continuing to rise, buyers may not have the option of ignoring tenanted properties.

Yet buyers who purchase a tenanted property - and particularly properties with a long-term tenant - will have to consider certain key points when doing so.

And in an already highly stressful period, these points are extra stressors that you definitely don't need.

Read on to find out more.

Owner-occupiers and tenanted properties: points to consider

First-home buyers in particular may decide a tenanted property isn't worth the extra stress of becoming a landlord and owner-occupier at the same time.

But if you have little choice, or decide to go the hard yards of running these two roads simultaneously, here are the most important points to consider.

1. Examine the tenancy agreement - and your tenants

When you're considering purchasing a tenanted property, the first question you should ask the sales agent is whether the tenancy agreement is a period or fixed-term one.

Property investors who plan to sell soon often "roll over" their tenant's fixed-term agreement to a periodic one, to make it easier for both owner-occupier and investor buyers.

Under a periodic agreement, the tenant only leases the property for an indefinite period, which allows you, as the buyer, to move in on short notice. 

However, fixed-term agreements (usually at least six months, if not a yearly, agreement) mean the tenant is legally allowed to stay in the property for the remaining period of their agreement - even when it's sold.

Also, don't forget to ask the sales agent about the tenant. 

Have they always paid their rent on time and taken care of the property?

Ask for details about any recent maintenance requests as well and other, similar issues.

2. Purchase landlord insurance 

Landlord insurance is often forgotten amidst the other stressors of home buying - but it's crucial, even if your tenant is responsible and their agreement is only in place for a month or two before you move in.

Common risks that landlord insurance covers include tenancy burglary, theft, damage, and vandalism, as well as loss of rent and legal expenses involved if you need to evict your tenant.

3. Consider your property manager

As well, you may want to engage a new property manager, or, depending on the remaining length of the property's fixed-term lease, simply continue with the current one to make life easier for you.

Either way, remember that property managers are often the largest investment expense after loan repayments, so it's crucial to get this point right.

4. Learn about tax issues

Tax points in and around a landlord life is another issue easily forgotten in the midst of buying but it's as crucial as landlord insurance.

Before buying a tenanted property, talk to your accountant about what tax you can claim on which rental deductions; what you need to pay in tax instalments throughout the year; what rental-related income to claim on your tax return; and capital gains tax (CGT) implications.

The Australian Tax Office (ATO) has plenty of information on these concerns too.

Again, bear in mind that this property may not be worth the stress of working out, and through, such tax concerns, especially if your tenant is only there for a few months.

5. Home inspections will be more difficult

Tenants legally need at least 24 hours' notice before anyone is allowed into their home.

This means building and pest inspections will be more difficult to arrange as you will have to run the issue past both the sales agent and the tenant.

Also, tenants may often want to stay in the home and can make inspections more difficult by not tidying the property before open house times.

Or, they may simply not have the time to do so.

This can make deciding whether the property is the right size for you and other, similar, points, more challenging.

Building and pest inspectors will also find their job more difficult, due to their inability to search and check under furniture, and your report will be less thorough as a result.

How to ensure buying a tenanted property easier 

There are ways to make buying a tenanted property as an owner-occupier a little easier.

1. Persuade tenants to move out early

The majority of tenants will know their landlord is considering selling, even before they're told a building and pest inspector needs access to their home.

For tenants on a periodic lease, they'll also know that living in the house is only for an indefinite period.

Yet those on a fixed-term agreement can still often be persuaded to leave early, usually through a lump sum of cash, such as a month's free rent or paying for their removalist fees.

However, don't offer such an incentive immediately.

Instead, discuss the issue with your sales agent first, who can either directly or indirectly discuss the possibility of moving out early with the tenants.

The sales agent may also discuss the issue with the vendor.

Showing plenty of kindness and understanding in the process, and being willing to negotiate financially or otherwise, is important.

If you're currently renting yourself, you may even want to offer them your current property as a possibility for the tenants to move into.

Don't forget too that the current rental market is extremely tight, which could be a very good reason for tenants being unwilling to move.

With luck, however, the tenants will move out early, making the above issues unnecessary.

2. Long-term settlements

This is an excellent idea if the tenants' fixed-term agreement still has several months before its finishing date.

Depending on how long the fixed-term agreement is, aim for a 60 or 90-day settlement.

This will give you time to persuade the tenants to live as early as possible and for them to find a new home because after settlement day, both the property and tenants are your responsibility.

First-home buyers may also appreciate the extra time to get their heads together and breathe - if only a little!

NB: first-home buyers can still access government first home owner grants when buying a tenanted property, but you do need to live in the home for at least six months in the first year after your purchase.

We’re here to help

Whether you decide to purchase a tenanted property as an owner-occupier or not, Listing Loop is here to help. Check out the range of properties for sale in the Loop.

If you would like further guidance, it’s worthwhile exploring the option of engaging a buyer’s advocate. Our Buyer Assist service pairs you with a buyer’s advocate who can help you with searching, evaluating and negotiating the purchase of property on your behalf.

Learn more about Buyer Assist and how they can help you avoid expensive property buying traps.