Looking for Advice on an Off-Market Deal
Hey! I'm looking for different perspectives on a situation we have going right now. I'm a relatively new investor. We own one single-family rental, are under contract right now for another, and are currently considering an off-market triplex.
Here are the details: the triplex is in a fairly decent part of the city. The price the seller is asking is pretty reasonable. The place has a fairly new metal roof, along with some other recent upgrades to the property. Under normal circumstances it would be a really good deal, I think.
The problem is, there's a tenant they're currently trying to evict. They've tried all sorts of things to get the tenant out, including offering cash, but the tenant won't budge. The court date for the eviction isn't until March. So our options are: 1) Buy the place now, deal with the problem tenant, know we're losing at least 3-4 months of rent, and risk the unit being trashed by the time we can get into it, 2) Have the contract run until after the court date, let the current owner deal with the eviction, assess the condition of the unit and adjust price accordingly, and risk interest rates being higher when we finally lock in our mortgage rate, or 3) Walk away.
I've already budgeted in some money for the lost rent and for renovating the unit after the tenant is out, but it still seems like an awful lot to deal with and a lot of uncertainties. Also, due to the price and the money I want to set aside for renovations, we likely won't do any other deals for a while if we do this one.
I'd love to hear from anyone with any advice to give. Thanks!
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#3 General Landlording & Rental Properties Contributor
- Real Estate Consultant
- Cleveland
Quote from @Rob Jones:
Hey! I'm looking for different perspectives on a situation we have going right now. I'm a relatively new investor. We own one single-family rental, are under contract right now for another, and are currently considering an off-market triplex.
Here are the details: the triplex is in a fairly decent part of the city. The price the seller is asking is pretty reasonable. The place has a fairly new metal roof, along with some other recent upgrades to the property. Under normal circumstances it would be a really good deal, I think.
The problem is, there's a tenant they're currently trying to evict. They've tried all sorts of things to get the tenant out, including offering cash, but the tenant won't budge. The court date for the eviction isn't until March. So our options are: 1) Buy the place now, deal with the problem tenant, know we're losing at least 3-4 months of rent, and risk the unit being trashed by the time we can get into it, 2) Have the contract run until after the court date, let the current owner deal with the eviction, assess the condition of the unit and adjust price accordingly, and risk interest rates being higher when we finally lock in our mortgage rate, or 3) Walk away.
I've already budgeted in some money for the lost rent and for renovating the unit after the tenant is out, but it still seems like an awful lot to deal with and a lot of uncertainties. Also, due to the price and the money I want to set aside for renovations, we likely won't do any other deals for a while if we do this one.
I'd love to hear from anyone with any advice to give. Thanks!
Simple get it for 15k less, or tell the owner ok you deal with the loser in the place. ITS ALL about the numbers
@Rob Jones, I would try to negotiate a better deal and accept the tenant situation if I felt that I could handle it better than the current owner or even if I just wanted the experience of handling it.
I bought a property in July where the tenant refused entry when confirmed showings came to see the property (including ME)! I made 2 simultaneous offers. One with the tenant removed before closing and a LOWER one with the tenant remaining. I then convinced the listing agent that he seller should negotiate the lower offer which they did. I ended up buying around 20% under list price in a market where the property should have sold at or a little over list price.
I look at any distressing situation as an opportunity if its one I am capable of dealing with and where I can get a better deal because of it.
As an aside. In tenant situations like this I might consider just suing the tenant separate of the eviction if I could get that to court sooner. Getting something on their record for leverage and knowing where they are to enforce a judgement could be a benefit.
Unless the seller is willing to lower the price to offset the lost rent and the cost of eviction, I wouldn't touch it.
Would the eviction clock start fresh at purchase?
Thanks for the replies, everyone!
My understanding is that the court date for eviction would remain the same. The original asking price is pretty good, all things considered, and we're pretty sure we can get the seller to come down another $10k. At that price, with the units fully rented, the place would cash-flow around $5000 a year. So the only real wild card is the condition of the evicted tenants place. But as we'd want to renovate anyway, I kind of figure that unless they set it on fire, flood it, steal all the appliances, or something like that, we might be ok?