Inheriting an Existing Tenant: A Simple Path to Rental Income
The easiest way to start earning rental income is by purchasing a property with an existing tenant.
It’s a straightforward process – all you need is for the tenant to sign a new lease with you, and your lender can include the rental income in your financial profile.
Most lenders typically allow you to include 50% of the rental income. This accounts for factors such as the tenant occupying less than half of your property, as well as potential vacancies, repairs, and maintenance costs.
While buying a property with an existing tenant saves you the hassle of finding a new one, it comes with its own set of pros and cons.
On the positive side, you skip the tenant search, but there’s a catch – the existing tenant might be paying below-market rent. Despite having a reliable tenant, you could potentially earn more by leasing your property to new tenants.
To qualify for rental income inclusion, the rental unit often must be a separate entity with its entrance, kitchen, and bathroom. Physically separated units are usually a prerequisite for lenders.