The final walk-through on a vacant house is simple. You show up the morning of closing, confirm the seller did not take the water heater, check that the repairs got done, and go sign.
On a tenant-occupied rental it is a different exercise entirely, and most investors treat it like the first one. You are not confirming the property is empty and clean. You are confirming that the income stream you underwrote is the income stream you are buying, and you are doing it in somebody else’s home, with limited access, on a schedule that is not yours.
This is where deals quietly change shape in the last seventy two hours. Not because the roof failed, but because the rent turns out to be two hundred dollars lower than the offering memorandum said, or the tenant gave notice three weeks ago and nobody mentioned it, or unit three has an occupant who is not on any lease.
What access you actually have
Start here, because it governs everything else.
You are the buyer. You have no relationship with the tenant and no independent right of entry. Access flows through the seller, who is the current landlord, and through whatever notice the lease and state law require. Notice periods commonly run twenty four to forty eight hours, in writing, for a reasonable purpose during reasonable hours. Some leases are stricter than state law. Some states are stricter than the lease.
Two practical consequences. First, a walk-through the morning of closing is not realistic on an occupied property, because the notice has to go out days earlier. Second, if the tenant declines, your leverage is limited and it is the seller’s problem to solve, which means it needs to be the seller’s obligation in the contract.
If you are already at the walk-through stage and access is a fight, it usually is not the first fight. The same obstacle tends to appear earlier at the appraisal, and how it plays out there is worth reading before you go under contract on an occupied building: tenant access refusals on a rental appraisal.
Write the access into the contract
The single most useful thing you can do about a tenant-occupied walk-through is handle it eight weeks earlier, in the purchase agreement.
Ask for a specific right to a pre-closing walk-through of all units within a defined window, with the seller responsible for delivering notice. Ask for the seller to represent that no tenant has given or received notice to vacate as of closing. Ask for estoppel certificates from every tenant, delivered before your contingency period expires rather than at closing.
That last one matters more than the walk-through itself. An estoppel is the tenant’s own written statement of what they pay, when they pay it, what deposit they gave, what the landlord owes them, and whether they have any claims. It is the only document in the file where the income comes from the person actually paying it rather than from the person selling you the building. We cover what to ask for and how lenders use it in the tenant estoppel certificate on a rental purchase.
The walk-through list for an occupied unit
You are looking for three categories of thing: physical condition you will inherit, income facts that differ from the file, and occupancy facts that differ from the lease.
Condition
Confirm any repairs required by the appraisal are actually done and done in the unit they were called out in. If the appraisal came back subject to repairs and the lender is holding money for them, this is your last look before that escrow is decided. The mechanics are in repair escrow when the appraisal comes in subject to repairs.
Check the systems you cannot see from the hallway: water heater age and any signs of leaking, visible plumbing under sinks, the panel, and whether the heat and cooling run. Look at ceilings under bathrooms on the floor above. Look for tenant-installed anything, particularly window units in sleeves that were not designed for them and appliances that are clearly not the landlord’s.
Note what is the tenant’s and what conveys. Appliances in an occupied unit are frequently the tenant’s own, and the schedule attached to the contract is often wrong.
Income
Ask the tenant directly what they pay and when they last paid it. You will be surprised how often that number does not match the rent roll. Ask whether they have a concession, a rent credit for doing maintenance, or a side arrangement on utilities. Informal deals between a small landlord and a long-term tenant almost never appear in the documents and almost always survive the sale in the tenant’s mind.
Ask when the lease ends and whether they intend to renew. A tenant who tells you at the walk-through that they are moving in six weeks has just changed your first year cash flow, and it is better to know before you fund than after.
Confirm the security deposit amount and where it is held. Deposits transfer to you at closing and in most states you inherit the full liability for returning them whether or not the seller actually hands the money over. That transfer, along with rent proration, is handled at the settlement table and is worth understanding in advance: prorations at closing, taxes, rent, and the security deposit transfer.
Occupancy
Count the people and compare to the lease. Extra adults living in a unit are common and are not automatically a problem, but they are a problem you want to identify before you own it, because removing an occupant who is not a party to a lease is a different and slower legal process than a standard eviction. If what you find looks like an unauthorized occupant rather than an unlisted family member, read buying a rental with a squatter or unauthorized occupant before you proceed.
Also confirm the seller is not staying. Post-closing seller occupancy on an investment purchase creates a specific set of risks and it needs to be papered properly rather than handshaked, which we cover in seller rent-back and holdover risk.
What a two hundred dollar surprise does to the ratio
Here is why the income questions are not just diligence hygiene.
You are buying a duplex at 205,000 dollars with 25 percent down, so the loan is 153,750 dollars. The rent roll you underwrote showed 1,650 dollars a month combined. Taxes are 2,900 dollars a year, about 242 dollars a month. Insurance is 1,320 dollars a year, or 110 dollars a month.
At 7.375 percent on a thirty year term, principal and interest is roughly 1,062 dollars. Total monthly obligation with taxes and insurance is about 1,414 dollars.
At 1,650 dollars of rent, DSCR is 1,650 divided by 1,414, which is 1.17.
At the walk-through the downstairs tenant tells you they pay 1,250 dollars, not 1,450 dollars, because the seller gave them a break two years ago and never papered it. Real collected rent is 1,450 dollars combined.
DSCR is now 1,450 divided by 1,414, which is 1.03.
That is not a rounding difference. A file that cleared a 1.15 threshold comfortably is now barely above break-even coverage, and depending on the program it either needs more money down, a different structure, or a renegotiated price. Run the version with your actual numbers on our DSCR deal calculator.
Worth knowing: on a purchase, lenders generally underwrite the lesser of the actual lease rent and the market rent from the appraiser’s rent schedule, so an inflated rent roll does not help you and a suppressed one can hurt you. How that number gets set is explained in the rent schedule and the 1007 appraisal.
If the walk-through turns something up
You have three levers and they get weaker as you get closer to the table.
Price is the cleanest, and it requires that you still have a contingency alive or a seller who wants to close. A credit at closing is faster than a price change and does not require a new appraisal, but lenders cap what they will allow, and the cap is real. The rules on that are in seller concessions and credits and how they change your cash to close.
An escrow holdback is the third option: money set aside at closing to cover a specific known item with a defined completion date. Not every lender allows one, and the ones that do want a scope and a timeline, not an estimate.
The one thing that does not work is deciding to deal with it after closing. Once you fund, the tenant with the informal rent break is your tenant and the discovery is your problem.
Where we come in
FMC Capital is a Pittsburgh-based brokerage. We place rental and rehab loans for investors across Pennsylvania and additional states, and on tenant-occupied purchases we push hard on estoppels and access language early, because those two items are responsible for most of the late surprises we see.
If you are under contract on an occupied building and the rent roll has not been independently confirmed, that is worth a conversation before your contingency runs. Get in touch or call 412-990-2941.
FMC Capital, NMLS #1840537. This article is general information for real estate investors and is not legal advice or a commitment to lend. Landlord and tenant access rules vary by state and by lease. Program requirements, rates, and terms vary by lender and are subject to change.
Equal Housing Opportunity. FMC Capital, NMLS #1840537.