Tenant problems before I even close. Red flag?

Question

I am trying to buy my first property to do a house hack. It is currently fully rented but one of the tenants was supposed to move out in late spring. He is refusing to leave. Court date for the eviction got pushed back to September 7th, by this time our lock on the mortgage interest rate expired and went up from 5.125% to 6.875%.

Is this a red flag about the other tenant who I will be assuming management of? Is there any advice for a situation like this?

My wife is feeling concerned about this too since we have no experience or mentors to guide us.

Chris Seveney · Answer

I do not think its a reflection on both tenants. In regards to the rate lock, I would absolutely go back to the seller and have him pay for you to buydown the loan back to your prior interest rate for closing.

Scott Mac · Answer

They refuse to leave because either, they can't afford a new place, can't afford to move, don't have the physical stamina to move, or are facing homelessness.

Is the eviction length of time normal for your area, or is the owner dragging his/her feet time wise?

You know way more about the other tenant than anyone in here does--but you know it's always a coin toss as to what renters will do if they CAN'T pay the rent.

Even with the best renter intake sorting scheme, things change in their life over time, which makes them handle move outs in different (unpredictable) ways.

-- Some just evacuate like it's Saigon 1975 (except your new tenant probably won't rename it Ho Chi Minh City).

-- Some stick around for a few days, or weeks (for various reasons).

-- Some make you go to every length of the law to get them out, making you incur expense (and for some owners) great stress (those who will face homelessness seem to do this--ie. not another rental for them, but couch surfing at a relatives, or in the street in a cardboard box in the snow and rain).

Most just move out, but some will create damage to the unit (what they consider revenge) because they have that type of personality. It's a nuisance but usually petty in the scheme of things--curse words spray painted on walls, toilets clogged up with toilet paper, holes punched in walls, carpets purposely stained with Kool-Aid, etc...

Some (very few--but it happens) will have to be carried out by 911 first responders--either dead from natural causes or from self inflicted reasons (goodbye cruel world kind of stuff).

Some will leave a "Broom Clean" unit, some will leave all sorts of debris and used cars on blocks on the property.

You can't tell ahead of time--other than if they have done this before--it seems likely they will do it again.

Good Luck!

Jaron Walling · Answer

@Nathan Holt "by this time our lock on the mortgage interest rate expired and went up from 5.125% to 6.875%" - Don't let these unknown tenants affect the outcome of this opportunity. Don't wait around and lose the lower rate. Talk to your bank and see what they can do. It never hurts to ask.

It's a minor red flag but I wouldn't assume both tenants act this way. You knew dealing with unruly tenants was a sacrifice. It's not the forever home but if the deal doesn't close on time at the agreed terms that's on the seller. "on the seller" = price adjustment, points paid down, etc.

Scott Mac · Answer

Here is a video from @James Wise about an eviction he handled for an owner in Ohio.

He has some "Wise" words about the process (which works differently in different areas--know how it works in your area).

https://www.youtube.com/watch?v=xWWJe-Db64I

Corby Goade · Answer

@Nathan Holt I get that, but is that what it says in your contract? Does an eviction make this deal a loser or is it just a minor inconvenience?

Corby Goade · Answer

Unpopular opinion: The current tenant and lease make 0% difference to me- I'm buying a property because of the way I know I can make it perform, how it's performing today doesn't matter to me at all. I know I'll be able to get an eviction if I need one and if going through that experience and expense is a deal breaker, then it wasn't a deal to begin with.

Who is managing the property now? What contingencies regarding the tenants do you have in your contract?

Nicholas L. · Answer

@Nathan Holt

do you have an agent?

what does your contract say about this?

Nicholas Salman · Answer

The 2 tenants can be entirely different, so I wouldn't generalize them both because of one interaction.  I think the best way to look at it is why are they responding the way that they are?  Is it just to be a pain or is there a deeper rooted issue causing some uncertainty.  Best of luck man!

Nathan Holt · Answer

its an inconvenience, i have the money for the rate lock extension and such, it's expensive but it's just an inconvenience

Tenant problems before I even close. Red flag?

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