Offer Accepted - Due diligence under way on SFH with two separate dwellings

Calgary, AB · Member since 2021 · 327 posts · 176 votes

3y

Hi BP community,

I recently got an accepted offer on a SFH in Alberta, Canada that has two separately metered legal suites. I'm currently performing due diligence with the property and need some advice. The property has two tenants currently in place which makes me nervous as I personally didn't screen them. This will be my first time managing a residential property which I'm assuming will take a bit more work than my commercial properties (I currently own and manage 4 commercial bays in the city I reside in). Because of this I want to make sure these tenants meet my standards. One of the units has a lease in place until early 2024, and I'm unsure of the other lease as I have not received the leases yet. When choosing my own tenants I would like to confirm their income, run a credit check and speak to past landlords but unsure if I can do this when the tenants are already in place.

Both suites are currently below market value (~20%) and I would like to do some work on the suites (light renovation) when they are not occupied.

What strategies do you use to ensure the current tenants are up to your standards when purchasing a property? Can I still run a qualification process when the tenants are already in place? Is there something in the due diligence phase that is a MUST to review that I may miss?

Any advice would be greatly appreciated! Love the BP podcast, their books and courses but rarely post on the forum.

Thank you everyone!

Kylene

In Alberta, you have to finish out the fixed-term lease. The Residential Tenancy Act (RTA) is fairly straightforward, so probably a good thing to familiarize. Always some risk in inheriting tenants, but I would ask to see the ledger to see if the tenants have been paying. Assuming you already walked the properties you have an idea of the conditions. Regarding renovations, one thing to watch for is if the building is pre-1990. At least in Calgary, you have to test for asbestos for pre-1990s.

I'm in Calgary, and happy to connect! 🙂

Good Luck!

0 Reply

Alan AsriantsBusiness Member

Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes

3y

I usually ask for 3 months proof of rent payment. This will show you how on time people pay. Then I would search the tenants names on google and facebook and see if anything fishy comes up. When doing a walkthrough of the property, how did they keep their unit? Was it clean? Organized? Is it easy to make accommodations to see the place or are they a pain to deal with?

Usually if they pay on time and keep the place clean, then they should be decent tenants. Difficulty of showing the unit is a good sign of how much push back they will give. ALSO, learned this the hard way. If they have WAY too much stuff in storage at the building, it is a red flag for me. These tenants are harder to remove as they can be attached to the property and have too many things to move. The lighter the tenants is (in the same of how many personal belongings they have) the better.

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0 Reply

Ray Hage

Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes

3y

Generally speaking, you will need to live with the current tenants unless they are somehow violating the lease (moving extra people in, extra pets, illegal activity, etc). However, towards the end of the lease and if they seem like good enough to your standards, you can ask them to complete your particular process to see if they meet your guidelines.

Personally, I inherited tenants over 7 years (duplex I bought in 2015) and still have them without ever doing a background check, etc. because they are amazing tenants. They take care of the property well and have been late only 1 time with rent. There is always a risk with inheriting tenants. If they don't seem that great to you, you can always ask them to leave after the lease is up to do renovations, etc to get higher end tenants later.

1 Reply

Kylene Heykants

OP

Member since 2022 · 15 posts · 2 votes

3y

Quote from @Stevo Sun:

Quote from @Kylene Heykants:

Hi BP community,

I recently got an accepted offer on a SFH in Alberta, Canada that has two separately metered legal suites. I'm currently performing due diligence with the property and need some advice. The property has two tenants currently in place which makes me nervous as I personally didn't screen them. This will be my first time managing a residential property which I'm assuming will take a bit more work than my commercial properties (I currently own and manage 4 commercial bays in the city I reside in). Because of this I want to make sure these tenants meet my standards. One of the units has a lease in place until early 2024, and I'm unsure of the other lease as I have not received the leases yet. When choosing my own tenants I would like to confirm their income, run a credit check and speak to past landlords but unsure if I can do this when the tenants are already in place.

Both suites are currently below market value (~20%) and I would like to do some work on the suites (light renovation) when they are not occupied.

What strategies do you use to ensure the current tenants are up to your standards when purchasing a property? Can I still run a qualification process when the tenants are already in place? Is there something in the due diligence phase that is a MUST to review that I may miss?

Any advice would be greatly appreciated! Love the BP podcast, their books and courses but rarely post on the forum.

Thank you everyone!

Kylene

In Alberta, you have to finish out the fixed-term lease. The Residential Tenancy Act (RTA) is fairly straightforward, so probably a good thing to familiarize. Always some risk in inheriting tenants, but I would ask to see the ledger to see if the tenants have been paying. Assuming you already walked the properties you have an idea of the conditions. Regarding renovations, one thing to watch for is if the building is pre-1990. At least in Calgary, you have to test for asbestos for pre-1990s.

I'm in Calgary, and happy to connect! 🙂

Good Luck!

Hi Stevo,

I am currently reading the RTA so thank you for the clarification. The property was built in 1956 so testing for asbestos sounds like it will be on my to do list renovations will happen during tenant turnover when the property is vacant which will be a while.

Thanks for you response!

Kylene

0 Reply

Kylene Heykants

OP

Member since 2022 · 15 posts · 2 votes

3y

Quote from @Alan Asriants:

I usually ask for 3 months proof of rent payment. This will show you how on time people pay. Then I would search the tenants names on google and facebook and see if anything fishy comes up. When doing a walkthrough of the property, how did they keep their unit? Was it clean? Organized? Is it easy to make accommodations to see the place or are they a pain to deal with?

Usually if they pay on time and keep the place clean, then they should be decent tenants. Difficulty of showing the unit is a good sign of how much push back they will give. ALSO, learned this the hard way. If they have WAY too much stuff in storage at the building, it is a red flag for me. These tenants are harder to remove as they can be attached to the property and have too many things to move. The lighter the tenants is (in the same of how many personal belongings they have) the better.

This is great. Thank you!

1 Reply

Kylene Heykants

OP

Member since 2022 · 15 posts · 2 votes

3y

Quote from @Ray Hage:

Generally speaking, you will need to live with the current tenants unless they are somehow violating the lease (moving extra people in, extra pets, illegal activity, etc). However, towards the end of the lease and if they seem like good enough to your standards, you can ask them to complete your particular process to see if they meet your guidelines.

Personally, I inherited tenants over 7 years (duplex I bought in 2015) and still have them without ever doing a background check, etc. because they are amazing tenants. They take care of the property well and have been late only 1 time with rent. There is always a risk with inheriting tenants. If they don't seem that great to you, you can always ask them to leave after the lease is up to do renovations, etc to get higher end tenants later.

Thanks for your response Ray. They kept the home really tidy and it’s well maintained so hoping that means that I’m inheriting great tenants :)

0 Reply

Ken Didychuk

Investor · Red Deer, AB · Member since 2017 · 50 posts · 33 votes

3y

Hi Kylene

Your realtor really should be helping you with a lot of this. Conditions could have been placed in the offer to allow you to interview the tenants beforehand. Odd that you would receive an answer on the lease particulars of one suite but not the other. If you are already familiar with screening tenants for commercial purposes, then you'll be fine with your screening for residential purposes. As for the utilities, you can (and should) register with the utility companies as the owner. If the tenants default, you will be notified (but not charged). All my rentals are legally suited up/down bungalows. Reach out if you'd like to compare notes!

Cheers

0 Reply

Kylene Heykants

OP

Member since 2022 · 15 posts · 2 votes

3y

Quote from @Ken Didychuk:

Hi Kylene

Your realtor really should be helping you with a lot of this. Conditions could have been placed in the offer to allow you to interview the tenants beforehand. Odd that you would receive an answer on the lease particulars of one suite but not the other. If you are already familiar with screening tenants for commercial purposes, then you'll be fine with your screening for residential purposes. As for the utilities, you can (and should) register with the utility companies as the owner. If the tenants default, you will be notified (but not charged). All my rentals are legally suited up/down bungalows. Reach out if you'd like to compare notes!

Cheers

Ken,

Thank you for your response. I never thought to put a tenant interview as a condition. I will look into registering as the owner. I’ll reach out if I have any questions regarding this. Thanks again for your time.

Kylene

0 Reply

Offer Accepted - Due diligence under way on SFH with two separate dwellings

Offer Accepted - Due diligence under way on SFH with two separate dwellings

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