Buying and who gets the rent?

Question

Working on negotiating/buying a 3 unit MFP with 3 tenants in place.  How is 'first month' rent treated with a purchase?

If we close May 31st, do I get the June rent?  If we close June 1st, should I use the "extra" $$ that the seller gets as a negotiating tactic?  Or is it part of the settlement?  Or do most people not get concerned with one month rent?

Any suggestions how to handle?

Timmi Ryerson · Answer

From the day you close you are entitled to any rent already collected and the full amount of each security deposit, pet deposit or any other type of deposit.  If rent is collected on other amenities, like parking, pool access, extra storage etc. you will get that rent also from the day the closing is signed.  Be sure it is in the title closing statement.  Be sure your title company has collected the check that can be delivered for any and all rent and security deposits due.  It is often hard to get them after the fact.  If there is a tenant who has not paid rent or owes back rent you should contact a lawyer to see what your rights at closing are to collect those rents from the seller and then he can go back against the tenant for unpaid rent due.  I would also present that tenant with a notice to pay or vacate immediately if it has not already been done.  You want your tenants to know that you expect full rent paid on time from the very beginning.  Remember, this is a business for you  and your tenants are not your new best friends.

Have a letter of introduction ready to give to your tenants in person the day you close.  It should have your contact information and any changes you expect in the near future, especially in their leases.  For example, if you are going to require them to pay rent via an automated system, explain that clearly and give your reasons.  If you have done your due diligence you have checked all leases and know that pet agreements where needed are in place as well as leases.  So there is nothing needed there unless you find an unauthorized pet on the property when you do your inspections. Congrats on your new property.

Roy N. · Answer

@Mike McCarthy

The rent allocation between the vendor and purchaser is an adjustment made at the time of Close based upon the day of the month the purchaser takes possession.

Timmi Ryerson · Answer

Sara Wade  MFP means multi family property which has 3 units.

Cara Lonsdale · Answer

As already stated, rent is prorated as of the COE, so if you close mid month, you would collect half of that month's rent PLUS, you get to collect a full month starting on the 1st.  Also, all security deposits should transfer over, so make sure you have an accounting of all of those from the Seller.

Sarah Wade · Answer

Sorry new and is learning, what do you mean by 3 unit MFP?

Mike McCarthy · Answer

@Timmi Ryerson @Roy N., thank you both for the details.  Makes complete sense and handled the same way as taxes, water, etc.

Makes it much easier knowing that this is the way it is 'always' done.  Thanks!

Buying and who gets the rent?

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