I'm in the process of in an offer on my first duplex. It's a duplex and will cashflow nicely in a growing area. It is in decent shape, and has tenants already which I'd prefer to keep in place at this time as I get up-to-speed becoming a landlord. One unit is tenant-at-will, lived there over 3 years and per the sellers agent, has always paid on time and in full at market rates...good news. The other unit, I was told upon my asking, "had an issue [paying rent] at beginning of covid when they were laid off, but are back on track now". I don't have much info other than that. The seller already used the last month rent that they'd had collected at the beginning, and their lease will be up Dec 31st (right around when I would be closing). It sounds like they expressed interest in staying, and I'd prefer to not have a vacancy right after I'd buy it. I'd be interested in what people recommend. Should I dig in deeper and ask more questions about the missed rent prior to making an offer? If I get the place, should I try to retain them and have them sign a new lease (providing another first/last)? Or just try to rent it to new tenants and risk a month or two of vacancy. Just curious if anyone has gone through anything like this. I'd be a first time landlord and have never inherited tenants, so not sure on what questions to ask. Massachusetts is also a very tenant-friendly state, so if they refused to leave/pay I know the process could get complicated and costly. Appreciate any advice. Thanks!
Updated about 2 months ago
Title should say "seller" not "buyer"
Congrats on identifying your potential investment. I would ask for the unpaying unit to leave frankly, given that they have already had a history of non payment and their deposits have been used in lieu of rent for these months, it makes the most sense that this tenant is not capable of continuing with the tenancy. While eviction moratoriums have been lifted from the State of MA, courts are severely delayed and you dont want to be experiencing that upon closing. Best of luck!
I hope you are getting written letters of indemnification from the seller and the tenants that is spelling out everything you just stated (amount of rent, when due, if there are security deposits, last months rent etc). I do not believe the security deposit can be used for back rent. I would be sure that that is in writing some where.. Also confirmed about the utilities other deposits, exact names etc
The back rent that is owed is not your worry. You want to know if they are current.
Short answer - if they are both current, and you get the estoppel letters, I would go forward.
If you close in December and they both have paid, it will be apportioned at the closing. I would then send both tenants a "welcome package" as it were : identifying yourself, where to send the rent, restating the amount, that it is due on the first etc.
Next you have to decide how you are going to run the building. Do you want them both month to month or a yearly lease? In either case, I would give them BOTH notice that you are ending their tenancy but offering a new one upon them completing an application (so you know who is there) and signing a new written lease (even if month to month, that way you can have such things as no pets no smoking etc) even if you offer them rent at the same rate. You can also require a security deposit if you want although you might not want to get into the complexities of holding a security deposit just yet. Have you viewed the units, what kind of shape are they in? Does it look like they are taking care of the places or beating them up? You might want to do this in January or February to see if they keep current.
Sorry its a lot to take in on your first purchase. Feel free to contact me if you have questions. You may want a lawyer familiar with landlord tenant matters to help you negotiate the P&S as a lot of this can be added in an addendum.
One more quick comment - You seem to indicate that the one that has missed rent payments is also there under a lease that expires December 31 (as opposed to the other that is TAW) I would ask for a copy of that lease - there could be a clause in there that automatically renews it for another year, then you would be stuck with that tenant (which may or may not be a bad thing) but then you are not able to raise the rent for an other year and you would only be able to evict for non-payment of rent.
Just had this happen to us but we knew it was going to be an issue and wanted the tenant out anyway(slobs). I would go in assuming the worst and make sure you can manage. I am in Ohio and scenario went like this:
Closed end of August. Tried to contact all tenants about new lease and terms as all were month to month. Could not contact the problem tenant.
Sept 2 No rent received from them(good!) posted eviction notice-they finally called. We told them per the notice they had 3 days to pay or be evicted. No money came but lots of texts and explanations.
Sept 6 Filed eviction
Oct 19 court date and eviction granted
Oct 27 sheriff serves eviction
Month of November cleaning and renovating hoping to have rented by 12/15/20
Explaining this so you know what can happen. That's 3 months of no rent and added expense of cleaning and eviction. We knew going in and this property will still BRRRR great. Just plan for the worst and make sure you can manage with these costs and timelines. Obviously this will vary by state and local laws.
this could go either way, and it could be a good sign they bothered to and were able to catch up! You want to do your own investigation about their jobs/credit and talk to the tenants. Why have they caught up? New job? Term limited unemployment payments? Something to be said for waiting out the winter in MA. If you think you need them out I wouldn't close with them in it. Make the offer contingent on the current owner doing it.