Purchasing a rental property that already has a tenant in place can be a smart investment move. For real estate investors in Virginia, this kind of deal offers the advantage of immediate rental income and a potentially streamlined transition into property ownership. However, buying an occupied property involves several legal, financial, and logistical considerations that differ from purchasing a vacant home.
We have helped buyers, sellers, and tenants navigate this exact situation, and we have found that understanding what to expect at closing, and preparing accordingly, can help ensure a smooth transaction. Whether you’re an experienced investor or purchasing your first occupied rental, this checklist will guide you through the essential steps at closing for tenant-occupied properties in Virginia.
Review the Lease Agreement in Detail
The first thing you want to do is review the lease agreement. This should be done well before closing, but as the closing date approaches, request a copy of the current lease and any addenda. Review it thoroughly to understand the terms you’re inheriting. In Virginia, leases “run with the land,” which is a charming phrase that actually means the buyer becomes the new landlord and assumes the obligations and rights under the lease.
What to look for while examining the lease:
Lease term and expiration date (you’ll want to know when you’ll be free to renegotiate any of those lease details).
Monthly rent amount and due date, as well as any grace periods and consequences for late payments. Is there a late fee?
Security deposit amount and where it’s held.
Tenant responsibilities (utilities, maintenance, landscaping, etc.).
Any special clauses or concessions, especially anything unusual.
Renewal terms or early termination provisions so you can be prepared.
Here’s our hot tip: Always confirm that the lease complies with Virginia Landlord and Tenant Law. If it contains illegal or outdated terms, consult a real estate attorney or a local property management team about your options post-closing. We can help with this, so don’t hesitate to get in touch.
Confirm Tenant Status and Payment History
Ask the seller for a tenant payment ledger and history of communications. This will give you insight into whether the tenant pays on time, how they communicate with the landlord, and whether any disputes are ongoing. If there is a history of late payments, you’ll want to be prepared for enforcing on-time rent collections. If you find that the lease has been routinely violated, you might want to think about whether an eviction ahead of their lease end date might be appropriate.
The more information you have, the better prepared you’ll be. Request rental payment histories, at least for the last 12 months. Look for copies of notices that were sent and any correspondence that was received. There should be records of maintenance requests and repairs.
A consistently paying tenant is a green flag. A tenant with a spotty payment history or constant complaints may indicate issues that could affect your return.
Transfer of Security Deposit
Virginia law requires the transfer of the tenant’s security deposit from the seller to the buyer at closing. The buyer is then responsible for returning the deposit to the tenant at the end of the lease, minus any lawful deductions. Here’s your security deposit checklist for your closing:
Confirm the deposit amount held
Ensure it’s documented in the lease
Include it in the closing disclosure or final settlement
Obtain a signed statement from the seller verifying the amount and condition of the deposit
Failure to properly transfer or account for the security deposit can expose you to legal liability later on. It should be easy for the seller to transfer these funds to you and if there’s any delay, make sure you investigate further.
Understand Local Landlord-Tenant Laws
If you have never been a landlord before or taken over the management of an occupied investment property, there are several things you’ll need to know about laws and regulations. Virginia landlord-tenant law is governed primarily by the Virginia Residential Landlord and Tenant Act (VRLTA), which outlines rules for leases, rent increases, maintenance obligations, eviction procedures, and more. It’s not always easy to stay up to date on all the laws, but there are a few important things you’ll need to know right from the start:
You cannot evict a tenant solely because you are the new owner.
A written lease takes precedence, but month-to-month leases can be terminated with proper notice (30 days in most cases).
Maintenance obligations shift to the new owner immediately upon closing.
Security deposits must be handled according to Virginia law, even if the seller was not compliant.
We recommend incoming owners read the VRLTA or consult a property manager to familiarize yourself with your responsibilities. We are always here to help.
Inspect the Property (Respectfully, If It’s Occupied)
Occupied properties can make inspections a bit more complicated but no less necessary. Coordinate with the seller and tenant to conduct a thorough walkthrough. If you have not had the property inspected professionally before closing, bring a professional inspector with you. The areas you’ll want to focus on include:
HVAC, plumbing, and electrical systems
Roof and structural integrity
Signs of deferred maintenance or tenant damage
Appliances and amenities included in the lease
Respect the tenant’s privacy and give proper notice (typically 24-48 hours in Virginia) before entering. Ensure that all agreed repairs or credits are addressed before closing.
Document Tenant Acknowledgement and Contact Information
As part of the closing, it’s helpful to have a Tenant Estoppel Certificate. This document is signed by the tenant and confirms the following details:
The lease is in good standing
The rent amount and due date
The security deposit amount
That no defaults or disputes exist between the tenant and current owner
While not legally required in Virginia for single-family rentals, it offers added protection by documenting the tenant’s understanding and acceptance of the lease terms. It’s also important that you gather, either from the tenant or the seller, information such as the tenant’s full name and contact info, their emergency contacts, and their preferred method of communication.
Update Rental Licensing and Property Management Records
Some localities in Virginia will require rental licenses or landlord registrations. If you’re working with a property manager, you can expect these details to be considered and taken care of already. Otherwise, it’s a good idea to check local zoning or county office requirements. If necessary, apply for or update the rental license and notify utility companies and update billing information.
If you're using a property manager, ensure they are fully briefed and introduced to the tenant post-closing. We like to be part of the process from the earliest possible point.
Plan the Transition of Ownership Smoothly
A seamless transition sets the tone for your landlord-tenant relationship. After closing, send the tenant a formal letter or email introducing yourself as the new owner. Include your contact information (or that of your property manager), instructions for rent payment (where/how), confirmation that the lease will remain in effect, and a timeline of any expected changes or maintenance visits.
Make it clear that you're honoring the existing lease and that you're available to address any concerns. This goodwill can make a big difference in the ongoing relationship.
Insurance and Liability Considerations
Buying an occupied rental property shifts liability to you immediately upon closing. Make sure you have the appropriate landlord insurance policy in place. You’ll need coverage for property damage, loss of rent, liability, and even legal fees. Ensure the policy starts on the day of closing, and notify your insurer that the property is tenant-occupied. Ask if the tenant is currently carrying renter’s insurance. You might want to make this a future lease requirement.
Understand Your Investment Numbers Post-Closing
Your closing statement will include prorated rent and possibly other expenses such as prepaid taxes, utilities, or HOA dues.
Post-closing checklist:
Confirm prorated rent credit (you’re entitled to rent from the closing date onward)
Review final settlement for accuracy
Set up bookkeeping and track income/expenses
Recalculate ROI and cash flow based on actual terms
The occupied property may generate immediate income, but unexpected repairs, vacancy risk after the lease ends, or a difficult tenant can impact your bottom line. Build contingencies into your investment plan.
Purchasing a tenant-occupied property in Virginia comes with a built-in revenue stream, but it also requires careful due diligence, legal compliance, and a proactive approach to managing the transition. By understanding your responsibilities and being prepared for what happens at and after closing, you’ll set yourself up for long-term success as a landlord.
This checklist is a starting point for ensuring nothing falls through the cracks. Work closely with your real estate agent, attorney, and property manager to ensure all documents are in order and that your investment is protected.
We’re property managers, so our general tip is usually a recommendation that you treat your inherited tenant with respect and professionalism. A positive landlord-tenant relationship not only improves retention but also enhances the value of your rental property.
Let’s talk about this. Contact us at Doud Realty Services, Inc. We provide expert property management in Norfolk, Portsmouth, Hampton Roads, as well as surrounding areas such as Virginia Beach, Suffolk, Chesapeake, and Newport News.