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As an investor should you buy a house with tenants in it or are you better off purchasing a property that is vacant? There are pros and cons to each.

Should you buy a house with tenants in it? If you're an investor looking to purchase a property and you find a property that already has tenants in it paying rent, this can sound like a great deal, but should you buy a property with tenants in it or is it better off to buy a property that is vacant and you can then go ahead and choose your own tenant?

Hey, I'm Ryan from onproperty.com.au, helping you find positive cash flow property. And in today's episode, I wanted to talk through some of the pros and the cons of purchasing a property has an existing tenant so you can understand; what are the benefits? what are the negatives? What are the risks? What's the rewards? And you can make a decision for yourself.

We're going to start by looking at the benefits of having a tenant in your property. The first benefit is that the entire goal of you purchasing property is to have a tenant in there paying your mortgage, providing you with cash flow, offsetting your cost so your property can go up in value if capital gains is what you want. But the entire goal of purchasing that property is to rent it out to someone else and if you're purchasing a property that already has a tenant, then you have effectively achieved that goal a lot easier than if you purchased a vacant property.

There's no advertising to get a tenant. There's no waiting to get a tenant in. There's no finding a property manager. The process is just so much easier because the tenant is already there. That is the major benefit of purchasing a property with a tenant.

Another major benefit is that you've got instant cash flow in that property. If you were to purchase a vacant property, it may take a couple of weeks to rent out. You may be able to get earlier access to advertise it and to get a tenant in there before you take over the property. But it may take you a couple of weeks to get some money in through the door.

In which case, you've got negative cash flow in that time. So, by having a tenant in there and just taking over the property with that tenant paying rent every single week, well, you've got instant cash flow there so you don't need to worry about the issues of getting a new tenant and whether your property is going to lie vacant. So that's a major benefit as well.

My favourite benefit, I think, is the predictable cash flow that comes from already having a tenant in there. So if you're looking at a property and you're trying to work out what is the positive cash flow of this property going to be? or how negatively geared is this property going to be? You can do it based on estimates of what you think the market value of the property is. You can talk to the real estate agent.

You can get pretty accurate there, but you don't necessarily know the property is going to rent for that much or if you're being taken for a ride. However, if someone's in there renting the property, then you know how much money you're getting and so you can go through, do your cash flow analysis and decide whether or not this is going to be a worthwhile investment for you.

If you need help doing that cash flow analysis, go ahead and check out propertytools.com.au, which is a tool that I created where you can just enter the purchase price and rental income and it'll give you some cash flow estimates or you can go through more details to get a more accurate result. So, again, go to propertytools.com.au to check out that tool. That's one of the things I love about having an existing tenant is you can estimate the cash flow ahead of time based on what the tenant is actually paying. So you're going to get a more accurate cash flow estimate. It's just going to be that much easier.

And then, the fourth benefit,