Should I add a contingency if units go vacant during contract?

Question

2 years ago I purchased my first buy-n-hold investment, 4-plex that was 100% occupied at contract signing.  While under contract, 2 of the 4 units went vacant without notice from seller.  I discovered 1 vacancy from appraisal report pictures (earlier inspection report showed clear signs of occupancy) and the other on final walk-thru the week of closing.  Both units had leases that were broken by these vacancies.

Not only did this cut my scheduled rental revenue in half upon closing for a few months, but each unit required several thousands in turnover cost due poor condition.  This was quite the baptism by fire for my first purchase.

Currently, I am getting ready to purchase another multifamily and I wanted to know if others feel that it would be good to place some sort of contingency in my offers that states if any unit's lease is broken while under contract, I have the right to back out or renegotiate.

Good idea?  Bad idea that will scare off sellers?  Sure, I get that if the deal is good, who cares... and no one likes inherited tenants anyways, but I wouldn't mind a little more protection during the purchase.

Roy N. · Answer

@Ryan Moore

We have used similar conditions in purchase offers where we have suspected the Vendor of being less than forthright and housing warm bodies simply to be able to advertise the property as being fully occupied.   The condition we typically use allows for a concession of 3-months scheduled rent if a unit becomes vacant between the acceptance of our offer and Close.

That said, when you collect estoppels during diligence, most "irregularities" between information supplied by the Vendor and the tenants' views will be exposed and you can simply negotiate a resolution at that time.

Ryan Moore · Answer

@Roy N. Thanks, I like that idea of a 3 month concession.  Based off my experience w/ my property, having a 3 month buffer would have been an appropriate amount of time to get the unit fixed up and rented.  Being able to have 3 months of all vacated units also would have allowed me to fix up both units at the same time... I had to actually only do one at a time due to $ restraints in my situation.

My initials thoughts were to be able to either back out of the deal or renegotiate, but having that set amount already in the contract, sounds like it'll be less headache.