Buying a tenanted property? The proof a vacant one can't give you

For most landlords who buy, the next purchase is a step towards a goal: a level of monthly income, or a portfolio that pays its own way. Many of them are buying from other landlords to get there. According to Pegasus Insight's Landlord Trends survey, run with the NRLA, 30% of the properties sold by landlords were bought by another landlord. If you are one of those buyers, a property with a tenant already in place can tell you far more before you commit than an empty one ever can.

Here, James Donohue, Founder of LP Exchange, the NRLA's official off-market property sales partner, sets out five things a tenanted property can prove before you buy, and why seeing it first matters as much as the numbers.

We are now almost six months into the Renters' Rights Act, and since 1 May tenancies in England have been periodic, with no fixed end date and no Section 21. The tenancy you buy is therefore the one you keep, so it pays to read the evidence carefully. These are the five things I would want a tenanted property to prove before I committed to it.

1. The rent is real

A vacant property gives you an estimate: an agent's view of what it might let for and a guess at how long it will stand empty. A tenanted property gives you a rent that is actually being paid, so you can price the purchase on income that already exists rather than income you hope to find. For an investor working towards a target, that matters, because the next step towards it begins on the day you complete.

2. It has been paid, and paid on time

A rent on a listing is only a number, while a payment history is proof. Ask to see how the rent has been paid over the last year or more, through a rent ledger or bank statements, rather than relying on a summary sheet. A steady record tells you more about the income you are buying than any projection can.

3. The terms are clear, and so is the next rent review

Read the tenancy agreement or written terms so that you know exactly what you are taking on. Then ask when the rent last went up, because a landlord can now raise it only once a year, by Section 13 notice with at least two months' warning, and the tenant can ask a tribunal to test the new figure against open market rent. Price the property on the rent in place, not on an increase you hope to make soon after completion.

4. The certificates are in date

Treat each certificate as a date as well as a document. Gas safety needs checking every year and the electrical installation at least every five years, and the EPC must be band E or above to let today, with some exemptions. The government has proposed a higher standard, broadly band C, by 2030, which is not yet law but still belongs in your numbers. The deposit, any licence the council requires and telling the tenant who the new landlord is are then jobs for your conveyancer on completion.

5. You saw it before the rest of the market

Good numbers are only half of the picture, and the other half is when you see them. On a portal, a well-priced tenanted property is in front of every buyer at the same moment, and you are competing with all of them. Off-market, properties are matched to buyers who have already said what they want, so you are first in, not one of hundreds, and you are not starting in a public bidding round. As Sally and Nick Sutton, investors buying off-market through LP Exchange, told us:

At LP Exchange, we request the tenancy information before a property lists, and the verifications are recorded. When a property matches what you have asked for, your account manager can share that file with you in one place, so that you can carry out your own checks before you commit.

If you are looking to grow your portfolio with income you can test before you buy, register what you are looking for and see what is available now.