Buying a property with a tenant not paying rent

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Buying a property with a tenant not paying rent

Elias Barend Westhof
Member since 2021 · 16 posts · 3 votes

So we’re about to buy our first home. It’s a 4-plex in downtown LA. One of the tenants in the house has not been paying rent for several months, and owes $14.000 in rent. The person has not been evicted because of the LA moratorium.

The question is: When it is time for the tenant to finally pay, does the tenant pay us (the new owners), or the old owner whom the debt accumulated under?

Thank you for any input!

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Ronald Allen Barney
Real Estate Agent · Tampa, FL · Member since 2020 · 411 posts · 373 votes
5y

The bigger issue is the moratorium.  If the language of the moratorium is that it also applies to new owners of a property, you've got a non-paying squatter courtesy your state government, until the moratorium ends.  When it ends it's the normal eviction procedures.  You will never see that money, I guarantee you.

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  • Ronald Allen Barney
    Real Estate Agent · Tampa, FL · Member since 2020 · 411 posts · 373 votes
    5y

    The bigger issue is the moratorium.  If the language of the moratorium is that it also applies to new owners of a property, you've got a non-paying squatter courtesy your state government, until the moratorium ends.  When it ends it's the normal eviction procedures.  You will never see that money, I guarantee you.

    3Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    It should go to the previous owner.  I would only buy it if the unit is delivered vacant or the tenant is set up and approved for rent relief where the govt pays their back rent.

    0Reply
  • Abe AlamPro Member
    Member since 2020 · 62 posts · 5 votes
    5y

    I wouldn’t touch that property with a ten foot pole with that tenant presently residing. 

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    5y

    I'm not sure there is a low enough price that I would pay to purchase a long-term, non-paying resident in a market with resident-friendly laws.  Real estate investing is supposed to make life better.

    3Reply
  • Elias Barend Westhof
    OP
    Member since 2021 · 16 posts · 3 votes
    5y

    Thanks for all the replies. Is there any particular reason we cannot simply evict the person after the moratorium ends in September?

    0Reply
  • Derrick Dill
    Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes
    5y
    Originally posted by @Elias Barend Westhof:

    Thanks for all the replies. Is there any particular reason we cannot simply evict the person after the moratorium ends in September?

    September is the new extension date. It has been extended several times already. Are you confident it ends in September?

    If it does end in September, there will be a significant backlog of people just like you trying to evict. Eviction would take a couple months before COVID/courts closed/impacted system. I'll say it'll take several months to do an eviction in (if) September. 

    California is a tenant-friendly state as it is, with COVID moratorium protections, there are even more complications and problems that arise with eviction.

    1Reply
  • Elias Barend Westhof
    OP
    Member since 2021 · 16 posts · 3 votes
    5y

    Thank you. I agree, it seems like a huge gamble. Do you know if there is any way we could offer cash for keys to the current tenants? Perhaps we can make an agreement with the current owner where he gives the tenants a CFK offer? 

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    Why don't you just move on. This is going to be a disaster....have you ever been through the eviction process in California? It was bad enough in the past, and it's getting worse. Landlords have lost the rights they should have as property owners. Run, don't walk, there will always be another deal, and one without a squatter involved....

    0Reply
  • Derrick Dill
    Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes
    5y
    Originally posted by @Elias Barend Westhof:

    Thank you. I agree, it seems like a huge gamble. Do you know if there is any way we could offer cash for keys to the current tenants? Perhaps we can make an agreement with the current owner where he gives the tenants a CFK offer? 

    Worth a shot. say you’ll buy contingent on the property being vacant. I would offer a couple thousand to help with getting them out/getting rid of the headache

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    @Elias Barend Westhof as long as the price reflects whatever risk you are comfortable with move forward.

    We've bought two properties already with the same issue, with huge discounts.

    Regarding the past for rent, it depends on what you negotiate in the purchase agreement. Most sellers will give it to you

    [email protected]248-209-6824
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    1Reply
  • Joanne Tsai
    Investor · Millburn, NJ · Member since 2018 · 141 posts · 100 votes
    5y

    @Elias Barend Westhof

    Yeah of course you can offer cash for key but so as the current owner. They probably tried and the tenants decided it’s better to live there for free.

    Are you trying to manage the property yourself? Are you familiar with the eviction process or dealing with non paying tenants in LA?

    You can offer the seller a few thousand dollars more and see if they can get the tenants out, but unless you are a super experienced landlord, my understanding with the law in CA, this can be a very lengthy and painful process for most.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    @Elias Barend Westhof

    Are you getting the message here?

    0Reply
  • Elias Barend Westhof
    OP
    Member since 2021 · 16 posts · 3 votes
    5y

    Great! I'll give that a shot and see what they come back to me with. Thanks for the input everyone, I appreciate it.

    0Reply
  • Eddie L.
    Member since 2020 · 89 posts · 43 votes
    5y

    @Elias Barend Westhof would you be able to afford to buy the place if the tenant was paying on time? If so, have the current owner evict the tenant or offer a concession in purchase price or back rent. If not, buy the current owners headache and make them pay you for taking on their problem.

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