Buying as Tenant Occupied

[Ferdia Kenny]

Looking at a Fishtown rowhome in Philly listed around $179,900, but it comes with a major catch. Tenant has reportedly been there 30 years, pays $1,100/month, wants to stay, and the property needs a full gut rehab. Listing says buyer must take property with tenant in place. Agent also told me it’s month-to-month, but listing says there is a current lease, so I’m trying to figure out what I’d really be walking into.

My thought is that if I could get it for around $160k, maybe the risk is worth it. Long term, I’d want this to become my primary residence, but I know that may not happen anytime soon if getting possession is a battle.

For anyone experienced in Philly, especially Fishtown, would you touch this deal? How would you underwrite the tenant risk, legal cost, timeline, and rehab uncertainty? And what discount would you need before even considering it?

Link to listing:

https://www.redfin.com/PA/Philadelphia/428-E-Flora-St-19125/...

[Kevin M.]

Do you have access to the property to inspect it with the tenant inside? You will gain invaluable insight if you're able to talk to the tenant for a bit. Test the appetite for a cash-for-keys situation.

If the tenant digs in and you're m2m you will need "Good Cause" to remove the tenant. You'll also need the property tested for lead and to provide the tenant with initial compliance forms. It's important to do this all by the book. 

I would try to do a pre-offer inspection and just talk to the tenant human to human and gauge interest in increasing rent to market rate or a reasonable plan to vacate and find new housing. At the same time- I would make sure the numbers work with a 1 year possession battle and maybe $5k in legal fees to really protect yourself in case the tenant fights the move.