In my area of the country, a sale of investment property is always subject to the existing lease. If the tenant is on an annual lease, you must honor the lease. Even if the tenant is on a month-to-month basis, a reasonable notice period (60 days in my area) is required. Check your local landlord/tenant laws for specific details.
That being said, I believe that you are in a better negotiating position when the property is vacant. If the property is rented, the landlord may not be as motivated to negotiate price and/or terms. When the property is vacant and draining the landlord’s wallet for maintenance and upkeep, you may get a better deal. Therefore, within this context, it is better to start fresh with new tenants.
Just read the nightmare experience below that JohnG went through after inheriting a dead beat tenant and having to physically throw them out. As a newbie, I tend to gravitate towards homes which already have tenants in them. Of course, every seller I talk to who has an existing tenant tells me the tenant is wonderful and pays on time - but they could be lying and I could end up with the trash that JohnG had to deal with. My fear is vacancy and having to cover two mortgage payments (which I couldn’t) when I can’t get a tenant.
So for you pros out there, is it better throw out existing tenants and start fresh or take a chance with the ones currently living in the place?