Tricky Tenant Situation In A Flip
How would you resolve this issue?
I recently came across a flip-style deal in Cincinnati, OH where the numbers looked excellent. All-in to buy and rehab the property at $160k with a conservative ARV of $220k and the possibility of selling as high as the 230s. Good neighborhood, would've sold quickly. House just needs light updating (within the $160k) and the numbers are solid.
Here's the rub: The house was occupied by a former owner. He was facing foreclosure and had deeded the property to an investor who paid off all the liens, let him stay in the property for a year, making payments, so that he could resolve his credit issues and buy the house back (at a profit to the investor of course). After six months the tenant hadn't made a single payment to the investor, who wanted to go ahead and cash out to put his capital to work in another deal.
So if you buy the house, it comes with the tenant. The tenant will have to be incentivized to leave.
What do you do? How much would you be willing to do/give to get the tenant out?
Would you evict and take the risk of the tenant doing extensive damage to the house (eviction takes about 45 days and $400 in attorney fees)? Would you offer to pay the tenant to leave? And if so, how much would you pay? Do you have another solution? Or would you just pass on the deal without meeting with the tenant because of the risk of inheriting a non-paying tenant who used to own the property and doesn't want to leave?