Updated over 8 years ago on . Most recent reply
Buying a property with tenants, but none of them are paying rent!
Hey guys!
I am in the middle of negotiating on a 3 flat with an illegal garden unit. We've agreed on a purchase price and are just about the signed the purchasing agreement. The listing agent mentioned that 3/4 of the units, including the garden unit, are rented out Month to Month with a gross income of 2000. I would really prefer the tenants stay around for a while after the purchase of the property to help pay for the mortgage while I rehab the place. However, I just learned today that the tenant's leases have actually expired, and the tenants are no longer paying rent. The listing agent only said that there was a rental income in order to help me qualify for the loan.
Is there anything I can do in order to get the tenants back on leases again before closing, so there is some rental income at the start? Should I ask for a credit for some time equal to the amount of rent that would be collected, and then kick the tenants out?
Most Popular Reply
#2 General Landlording & Rental Properties Contributor
Your two options are to either negotiate vacant occupancy at closing or provide the present owner the option of having the tenants sign a lease you provide him and start collecting rent. If you do decide to keep them it is very important that you have them only sign M2M leases to insure you have full control. Make sure the new lease brings all tenants to market rent, this will help clear out the bad seeds and make your transition into ownership easier. Never put inherited tenants on a term lease as many, if not all, may need to be replaced.
It makes no scenes that they are not paying rent. When a lease expires it automatically becomes M2M, stays in effect, and continues as is.
With zero income I would take my chances and reduce my offer considerably since with no income it has very little value. You should be taking advantage of the sellers incompetence. Banks do not accept potential income only actual income. If you tell the bank you have $2000/month rental income that is mortgage fraud. Huge mistake.