Buying a house with tenants

4 Replies

Hello Biggerpockets,

 
I recently came across a property that has tenants who pay below market rent due to the fact that the owner has some kind of relationship with them.

What would be my best bet to buy the place vacant?

Or

To raise the rent as soon as purchased? And if so whats the best way to this?

Meet with them in a pleasant manner and ask them what they prefer. Pay more or leave. If they want to stay, sign a new lease before closing at higher rent. If they want to leave, maybe work with them some on timing.

See what else you can find out about their relationship with the current landlord. How long have they been in the unit and the condition? I would give them notice per your states laws if you intend to try and keep them, and do the increase of rent. Because of their relationship with the landlord figure on them more than likely moving out, so be ready to look for new tenants and that might not be a bad thing.

How about you put the onus on the owner? Put in a stipulation that before closing, the owner must have the tenants vacate the property. I prefer it this way because, personally, it reduces headaches. What if the tenants don't agree with the suggested increase in rent? What if they become upset and decide that now they don't want to pay you period? To me, whatever you can do where you are not the bad guy, do it.

If there are leases in place they have to be abided by, of course it depends the way the lease is written. 

Does it have a 30 (whatever period of time) day termination for both sides? 

Is there a different termination clause that might favor the tenant?

Does the lease indicate no increase since they may be family members good friends with owner?

Have you approached the owner regarding anything on the property and tenants - you said you recently ran across - what does that mean?

If you have already spoken with the owner how about mentioning having the property sold vacant so you can start with fresh tenants. Or, ask to see the leases to determine your strategy. That may not be something the owner would do if it's not under contract as part of the period of inspection you can ask for all those things. 

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