Hello BP Community,
For all you Buy and Hold experts out there, would/do you ever buy a property with an existing tenant? Please state why or why not? If "yes", how do you handle it? Do you have to honor the existing lease? Would you make your offer conditional on the tenant passing your screening, etc?
Thanks in advance!
I bought one of my early units with a tenant in place. It was profitable from day 1. In fact, I had a rent credit at the closing for the current month. (Pay attention to when the rent is due and when you close. If rent is due on the first of the month you should get a credit for 29 days if the closing is on the second of the month. If you close on the 28th you will only get a rent credit for 2 days.)
The tenant had been in the home for a couple years and the previous landlord provided a clear rental history. There was a good lease and a good rental rate. I did not have to do any repairs at all and the home already had a rental cert. from the City. If I recall correctly, the tenant kept paying on the current lease and when that expired she stayed on as a month to month tenant.
If buying income producing properties I prefer one with a tenant.
No vacancy $$ , no commission.
I prefer to talk to tenant about the property before purchase - I want to hear all the "trash" the owner will try to swift out from under the carpet.
If you buy the property in a conventional transaction I'm sure you as the new owner need to keep the existing lease.
If you buy property at the auction - like I do, Obama created this law that if a property with tenant with valid lease got foreclosed, new owner need to allow tenant to stay for up to 90 days.
This in a conditions of:
-New lease to be sign
-Comparable rent market value (no lowball rent)
More info google Protecting Tenants at
"Protecting Tenants at Foreclosure Act of 2009"
Hope it's helps
We frequently buy properties with tenants in-place - when you are buying MFH, you rarely take vacant possession ... nor would you normally want to have a big empty building ;-)
You inherit the existing contracts (leases) with the purchase and must honour them. In some jurisdictions there is an exception if you, or an immediate family member, plan to occupy one of the units (or the entire property if a SFH) which allows for you to break the lease - request the property (SFH) or unit (MFH) be delivered to you vacant
@Jeff Rabinowitz Thanks for that information that's a big help. Especially about the Rent Credit. Can you please explain about the Rent Certification from the City. Does a SFH (which is what I am looking at in this case) require some sort of certification? I'm never heard of that before.
@Alexander Merritt , the rental certification I spoke of is strictly a local ordinance. Many cities in Michigan impose inspection and certification rules on SFH rental property. Some also require the landlords to get licenses. They are revenue enhancement techniques for the cities but sometimes they are enforced with fines or restrictions on monetary judgments if you ever have to go to court to evict a tenant. I have rentals in one city that imposes these rules and have rentals in other cities that do not. Check with the city where you plan to own property or, better, find a landlord who has rental property in your city to see how strictly the rules are enforced.
I second the "talk to the tenants" advice. Most folks have a list of gripes but don't really want to move. I talk to tenants about security deposits and last month's rent( both of which I require), specific condition of the property and the neighborhood in general. If it looks like they aren't going to get me my required items, I ask for that unit to be vacant at closing.
I have one tenant that I inherited in 2010 still in one of my units. He's a bit of pain, but his rent keeps coming in on time and he hasn't destroyed the place yet. Once we got through the growing pains of the landlord/tenant relationship it has been fairly smooth sailing.
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