Los Angeles, CA · Member since 2015 · 117 posts · 13 votes
Hi everyone,
So I'm in escrow for a 4plex that is fully occupied and currently manged by what seems to be an experienced and well organized firm. 1 of the units has been occupied since 2010, 2 since March, and 1 since Mary (2 are section 8). Is it common to ask for proof of rental payments for past 3 months (or first month in case of the new tenant)? I'd like to be diligent without being excessive.
Without a doubt, ask for rental history. No seller should be offended by that request, and if they are, they are hiding something. The worst inherited tenant I ever had had a spotty payment history and the previous PM let her get away with it saying she always caught up. Well I had to evict her soon after taking over and she did major damage to the property. Do not take properties with bad tenants or at least ask for a substantial discount to pay for eviction and clean up!
If another investor was selling to you without management I would be more lenient as most investors don't keep great records. A property management firm should be able to pull the books for you in about 10 min - so I would request. As well as the deposit amounts you will be credited with at the closing.
You don't want to buy a property that will require evicting 3 of the units next month because they haven't been paying and management hasn't been diligent in collecting.
Make sure you understand the section 8 - full or partial voucher - Sometimes section 8 only pays a portion - I know of landlords that have allowed the tenant not to pay their portion if small $25-50 a month because they were happy with just the section 8 amount.
If another investor was selling to you without management I would be more lenient as most investors don't keep great records. A property management firm should be able to pull the books for you in about 10 min - so I would request. As well as the deposit amounts you will be credited with at the closing.
You don't want to buy a property that will require evicting 3 of the units next month because they haven't been paying and management hasn't been diligent in collecting.
Make sure you understand the section 8 - full or partial voucher - Sometimes section 8 only pays a portion - I know of landlords that have allowed the tenant not to pay their portion if small $25-50 a month because they were happy with just the section 8 amount.
I appreciate your reply and advice. I already have all lease copies with rent/deposit details and sounds like your recommendation would be to just confirm the timeliness of the payments. Seller's agent is also managing the property at this time and as much as I want to avoid the scenario you mentioned above, I don't want to be over the top either (we may be doing more deals with her and she may continue managing this property for us).
Without a doubt, ask for rental history. No seller should be offended by that request, and if they are, they are hiding something. The worst inherited tenant I ever had had a spotty payment history and the previous PM let her get away with it saying she always caught up. Well I had to evict her soon after taking over and she did major damage to the property. Do not take properties with bad tenants or at least ask for a substantial discount to pay for eviction and clean up!
Even better reason to request- you are an investor, they work with investors. Pretty common questions when investing money into what is expected to be a cash flowing asset. If you are considering a business relationship with this party, here is a great opportunity to find out if they have their poop in a group.
Without a doubt, ask for rental history. No seller should be offended by that request, and if they are, they are hiding something. The worst inherited tenant I ever had had a spotty payment history and the previous PM let her get away with it saying she always caught up. Well I had to evict her soon after taking over and she did major damage to the property. Do not take properties with bad tenants or at least ask for a substantial discount to pay for eviction and clean up!
I appreciate your reply. I certainly will ask for rental history though will probably stop short of asking for proof of payments. I met the PM and they seem very professional, experienced, and organized (not that these attributes guarantee anything)
Even better reason to request- you are an investor, they work with investors. Pretty common questions when investing money into what is expected to be a cash flowing asset. If you are considering a business relationship with this party, here is a great opportunity to find out if they have their poop in a group.
Yes, thank you. I've already sent instructions to my agent to ask about the history but as mentioned in another reply, I'm thinking that asking for proof of payments is a bit much. Would you agree?
@Payman A. proof of payments not required but the ledger for the last 6 or 12 months wouldn't be too much. Who knows if it is accurate but you would know if there is a running balance with a tenant. If the manager is willing to keep managing the property it must not be too much of a pain in the neck!