Buying Tenanted Property

[Georges A.]

So I finally was able to sign the P&S on a multifamily property for Buy & Hold investment. This took me 6 months in the touch Boston market. Before asking my question, I would like to thank the great community of BP for helping me along the way. I can't stress enough how essential this blog was to my research, house hunting, and offer process... so Thank you!

The 3MF I am buying is tenanted. 2 tenants w/o leases who are hoping to stay and pay cash, and one tenant is the actual owner who has a lease that expires in October. My plan is to get new tenants for several reasons esp that they're paying way below market value.

Doing some research on the process (remember MA is a tenant friendly state) and after speaking with my attorney, this seems a little bit scary the more I know about it. I read a lot about how the tenants could simply refuse to leave and drag me to court - and I have not even got the property yet.

My question is: What would be a good approach to initiate with the tenants? My attorney suggested cash for keys but I am literally DRAINED from the purchase and still have the closing costs to worry about and hoping to avoid unnecessary expenses. Another investor suggested coming out with the guns blazing and serving them a 30 days notice to vacate and raising the rents on them so they self vacate which doesn't sound right to me.

plz advise

[Ann Bellamy]

George,

a couple of things:

1.  You can't even offer cash for keys in MA until you have informed the tenants of their rights regarding their tenancy.  I'm sure your attorney, if he specializes in landlord/tenant law, knows this, he may not have mentioned it to you.   But cash for keys could still be cheaper than evictions if they stop paying.

2.  Since when can an owner lease to himself?  Ask your attorney about that too.

3.  If you are buying a multi in MA, or anywhere for that matter, you should never buy it without having cash reserves.  What if while you're playing hardball, the two tenants stop paying and refuse to leave?   It will take you months to get them out, and the bank won't be understanding about your mortgage payments.  What if while you are trying to evict them, (assume it's December by then)  The heating system quits and you need a new one? 

Yes, MA landlording is challenging, but there are plenty who do it very successfully.  But the successful ones have cash reserves to get them through the tough parts.

I once bought a building and raised everyone's rent immediately.  I learned very quickly how to clean out a building and have almost no rent at all coming in.  In your position I'd take it one unit at a time.  I'm sure there are plenty who will disagree.