When Buying Tenant Occupied Property

Question

From reading here, it's clear that marketing to absentee owners is a staple for many investors. I have to assume that many of those properties will have tenants currently in place.

When this is indeed the case:

1. Do you get to inspect the inside of the property before making an offer?

2. Do the tenants get to stay in the property for the remainder of their lease agreement with the previous landlord?

If the answer to question 2 is yes, then I have to assume that fixing and flipping these properties is out of the question, right?

Please advise.

Brandon G. · Answer

Thanks for the info. That kind of throws a wrench in what I was planning to do. I was planning to market to absentee owners looking for flips. What is a flipper to do?

Paul Ewing · Answer

1) I have heard a number of people say they can't get in before making an offer that is accepted.  For this reason I think you would want to have some contingency clauses in the contract letting you out or opening it to renegotiation based on inspection of the insides before closing.

2) You have to honor any remaining time on the current lease.  I would want to make sure you had copies of all current leases before closing.  Also try to get the security deposit money since you will be required to return it to the tenants when they leave and since you are taking over after they have moved in it will be hard to base damages on anything but the condition the units are in when you bought it unless there are some good documentation that the seller provides you and that can still be tricky if they fight.  If you really want to fix and flip, build a thousand or so into your budget and see if you can do a cash for keys if they agree to move early.

Dawn Anastasi · Answer

1. Yes, hopefully you want to see what you're going to be dealing with.

2. Yes, if the tenants have more than a MTM lease then you have to honor it and that would kill the idea of a fix and flip.

Andrew S. · Answer

@Brandon G.

Yes, I fully inspect a tenant occupied property before closing a deal and yes, the existing lease will transfer to you and you have to honor it.  That said, I suppose you can try to buy out the tenant's lease if you want to fix and flip the property.