Rental Property Investor · Lawrence, KS · Member since 2019 · 6 posts · 2 votes
Hey guys,
I am a current college student who's looking into buying a duplex with an FHA loan. There is a specific off-market property who's owners I have been in contact with.
The duplex is a 4 bed 2 bath in one unit and a 1 bed 1 bath in the other. I am having troubles finding a way to make this work as it is currently leased out until the end of July 2020. As well as the owners just leased out both sides to other tenants for August 2020 through July 2021.
My question is, I believe that with an FHA you have to move in within 60 days of closing. But I'm not sure what to do with the current tenants and the future tenants.
I was thinking that the current owners may be able to pay off the 1bed unit, allowing me to move in. Or just wait to go through closing until 90 days before the lease ends.
As for the future tenants that are leased from Augusta 2020-July 2021. I’m not sure what to do. Will the lease be able to be terminated? Or will I need to pay the future tenants off?
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
Leases generally transfer with ownership, so pretty much the only legitimate way to get the tenants out of the lease agreement would be to have the tenants agree to it. If they don't want to get out of their lease, then you really don't have much of an option. This also applies for the leases that are signed but have not started yet.
Rental Property Investor · Lawrence, KS · Member since 2019 · 6 posts · 2 votes
6y
@Cassi Justiz
Okay so what would be the next move? Could I still go under contract and then figure out if the tenant/future tenants would be willing to move out? Then either cancel the contract if they don’t want to or go through it they agree? I’m not sure the owner would want to go through the time and then have the deal fall out.
How do others with FHA loans convince the owner to pay off the tenants? It seems very risky on the owners end, especially if the contract falls through.
Is the best option to follow through with the loan in hopes of convincing/paying off tenants? What would be the repercussions of not being able to occupy the house with an FHA loan?
Could something like a rent increase basically “force” them out?
Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
6y
Most owners will not accept an FHA contract if they have tenants in place (if they know anything about the FHA buying process). Essentially you have to prove to the loan underwriters that you will be able to occupy the home within 60 or so days or they won't approve the loan. This means that the current owners would have to have enough faith in your ability to close the deal that they would be willing to convince the tenants to get out of the lease PRIOR to your loan being approved. Your loan will almost certainly not be approved with those kinds of extended leases in place.
You won't be able to change the terms of the lease until it is time for the leases renew. You likely have to honor any documents that the current landlord has in place including the upcoming leases. *Unless they have some sort of provision in the lease that says it won't transfer with ownership changes. (This would be highly unusual).
With leases this long I would just look for another deal or financing option. If you are dead set on house hacking, then you'll likely just need to find another property. If you are just wanting to buy a multifamily property, then you can look into conventional financing but you will usually need to be able to do 20% down.