Buying a Rental With a Tenant Already in It: 8 Documents to Get Before Closing and the Day-One Letter to Send

Buying a rental that already has a tenant sounds like a shortcut: no vacancy, no turnover, rent from day one. For an owner who lives in another state, it can be. But you are also inheriting a lease you didn’t write, a security deposit you never collected, and a relationship with someone you have never met. This guide walks through what to get before closing and what to send on day one, so the tenant (and their deposit) doesn’t turn into a surprise.

The misconception: “Once I own it, the tenant signs my lease”

A sale generally does not erase an existing lease. The Texas Real Estate Commission’s residential lease addendum puts it bluntly: even a box saying leases must be terminated by closing “will not amend or terminate any existing lease” (TREC No. 51-1). A Santa Monica guide for new owners says the same thing in plainer words: “existing rental agreements remain in effect,” and oral leases count too (City of Santa Monica).

Interpretation, not fact: plan to live with the current rent, term, pet rules and repair promises until the lease ends or the tenant agrees in writing to change them. If the numbers only work at a higher rent next month, the deal probably doesn’t work.

Fact: the deposit follows the property, and so does the liability

• Texas: the new owner “is liable for the return of security deposits” from the date title is acquired, and must give the tenant a signed statement with “the exact dollar amount of the deposit” (Prop. Code 92.105). The seller stays liable until the buyer receives or assumes it.
• Florida: deposits and advance rent “shall be transferred to the new owner” with an accounting per tenant. There is a rebuttable presumption the new owner received the deposit, limited to one month’s rent (Fla. Stat. 83.49(7)).
• California: before transferring, the seller must give the buyer a written statement of the deposit remaining and any deductions, and notify the tenant of the transfer and the new owner’s name, address and phone (Civ. Code 1950.5). A successor owner also has 15 days to give tenants the owner/manager and rent-payment details (Civ. Code 1962).

In plain terms: if the seller collected $1,800 and the closing statement shows no $1,800 credit to you, you may still owe the tenant $1,800 when they move out. Check the settlement statement line by line.

The 8-document request (send it the day your offer is accepted)

The Texas addendum gives a good template even outside Texas. It asks the seller to state, for each lease, that it is in force, no tenant is in default, no rent is prepaid, no offsets are owed, there are no tenant claims or disputes, and there are “no other agreements” outside the lease (TREC 51-1). Turn that into a list:

1. The full signed lease, plus every addendum, renewal and amendment. Copies of oral deals in writing.
2. A rent ledger for the last 12 months: amount, date paid, method, late fees. Bank deposits beat a spreadsheet.
3. Deposit and prepaid-rent statement: amount held, where, and any deductions already taken.
4. Move-in condition report and photos. Without them, proving damage at move-out gets much harder (see our move-out and deposit guide).
5. Side agreements: “I said you could paint,” a promised new fridge, a month of free rent, a pet approved by text.
6. Open repair requests and recent invoices (12 months).
7. Utility and appliance setup: who pays what, any owned vs leased water heater or security system.
8. A tenant estoppel letter, signed by the tenant, confirming rent, deposit, lease end date and that no promises are missing. Your agent or title company can supply a simple form. It is the tenant’s version of the seller’s story, and the two should match.

In Texas, if the seller hasn’t delivered the leases, the addendum gives them 3 days and lets you set a window to terminate after you receive them. Fill in that blank; don’t leave it empty.

Red flags that should change your offer

• Rent paid in cash with no ledger, or “paid through December” with no record.
• Seller can’t say what the deposit is, or says it was “used for repairs.”
• Tenant refuses to sign an estoppel, or their answers differ from the seller’s.
• Lease ends within 60 days of closing. You may be buying a turnover, not a tenant (budget with our 14-day turnover plan).

Illustrative, not a quote: a $1,600/month tenant who is quietly two months behind is a $3,200 hole before you count court costs or vacancy. Ask for a credit, a seller-handled resolution before closing, or walk.

Day-one letter: what to send the tenant

Send it the day you close, by mail and email or text, so the tenant isn’t paying the old owner next month:

1. Introduce yourself (or your property manager) and confirm the lease stays in effect.
2. Give the owner/manager name and address for notices and the new way to pay rent, with the first due date.
3. State the deposit amount you are holding (in Texas, signed; this is the 92.105 statement).
4. Give a repair-request channel and an emergency number.
5. Ask them to confirm receipt.

Then schedule a friendly walk-through within 30-60 days, with proper notice (our mid-lease inspection guide covers state entry rules).

Money note

IRS Publication 527 says not to include a security deposit in income if you plan to return it; amounts you keep, or a “deposit” that is really last month’s rent, are treated differently (IRS Pub. 527). Keep the transferred deposit separate in your records, and ask your tax preparer how the closing-statement prorations should be handled.

Buying a tenanted rental pairs naturally with our remote due-diligence plan and first-30-days checklist. For the bigger picture, see how to manage out-of-state real estate yourself.

This article is general education, not legal, tax, lending or investment advice. Laws vary by state and city and change over time; check the current rules for your property and talk to a licensed professional before acting. The featured image is AI-generated and illustrative.