Should I buy a good property with a bad month-to-month tenant?

3 Replies

I've never inherited a tenant with a property purchase, nor have I served an eviction, but I am faced now with the prospect of buying a good property/location where the tenant has a few red flags.  They are currently leasing month-to-month.

The problems:

1.  They are unsanitary.  Open food was stored all over the floors in every room.  Mostly things like cheese puffs, chips and pop tarts.  Odor of feces throughout, but not a smell like sewage that indicates an issue with the property itself.  Roaches and rodents are likely there even though I didn't see any.

2. It looks like they probably cannot afford the rent because they had a squatter style room setup: all mattresses were on the floor with no box spring or bed frames, lack of dressers or basic furniture in bedrooms, no place for clothes/clothes were piled on the floors, no decoration besides computer printed B&W images taped to the walls.

3.  The listing advertised that they are paying $950 rent per month for 4 years month to month, but the history on Zillow shows that 4 years ago the property was listed at $1000 per month rent.

The issue of unsanitary living is a big liability. Since they are renting month to month, I can simply terminate the lease, or evict them, which my investor agent suggests doing. Even during the pandemic here, he said evictions are not terribly slow, difficult or expensive. But my main concern is that though they are unsanitary, they still look like a candidate to use the CDC's (unconstitutional) order to ban evictions under specific circumstances. Most of you are probably aware of this order which was a big topic here, but here's a link anyway

https://www.marketwatch.com/story/cdc-issues-nationwide-eviction-ban-through-the-end-of-the-year-in-an-effort-to-control-coronavirus-2020-09-01?mod=article_inline

I would hate to be forced to let them live in filth and catch hantavirus, so that they have a reduced risk from catching SARS-CoV-2 by living in government housing or with their family. And it is a good property.  Should the possibility of having to evict soon, under these circumstances, seriously dissuade me from buying a good property for long-term holding?





  


Get the rent roll to confirm the rental history.  No need to speculate.

Reduce your offer price the cost of clean up, repairs, and potential vacancy during an eviction (now or after the moratorium).

@Daniel K. If you are getting into the real estate investing game, evictions and dealing with problems that come with inheriting tenants is something you'll need to get over. I purchased a highly distressed apartment building back in February. Of the 8 units, 5 required eviction. I got 3 people out somewhat quickly, and expect #4 and #5 to be gone by 10/31 based on where I'm at with the eviction process. The building is in a neighborhood that is starting to turn, there are lots of amenities and desirable businesses nearby.

Value exists in opportunities most people think are too risky. If this house is in a good neighborhood and you understand the market and have a good handle on the financials, you should do the deal. Evicting tenants is just part of this business.

there is value in issues like this.  agree with the rent roll, must get that doesn't have to be a guessing game, and consider your rehab costs in your purchase price...could be a decent property for you top turnaround and maximize the income, but dealing with a bad tenant is a hard reality you will have to get used to  good luck!