Inheriting tenants, How do I know they are up to date on rent?

6 Replies

Though I don't feel great about it, I am in contract for a duplex where one unit is occupied by a long term tenant paying under market rent.  Though I would love to close on an unoccupied property, in this circumstance I would like to keep the current tenants happy (I don't know... I am trying to be a good guy even though Ohio is very easy to get someone out).  

My only concern is that I want to be 100% certain that these tenants are up to date on all rents and that they are paying the amount told.  How do I cover myself here?

Having a tenant in-place can be better than closing on a vacant property.  With a vacant unit, you are guaranteed to have no rent until you get a new resident in.  With an existing resident you have revenue from day one, and your risk is just the cost to evict and re-lease.

If you want some level of confidence that you have a viable resident, ask the seller to provide bank statements showing the deposits of rent.

@Ryan Cleary You really should get an estoppel certificate signed by the tenants. That confirms lease terms and deposits held.

Any deposits and last month's rent held by the seller should transfer to you at closing and go into your escrow account.

Originally posted by @Ryan Cleary :

Though I don't feel great about it, I am in contract for a duplex where one unit is occupied by a long term tenant paying under market rent.  Though I would love to close on an unoccupied property, in this circumstance I would like to keep the current tenants happy (I don't know... I am trying to be a good guy even though Ohio is very easy to get someone out).  

My only concern is that I want to be 100% certain that these tenants are up to date on all rents and that they are paying the amount told.  How do I cover myself here?

Ask to see bank statements showing the rent has been deposited into the landlord's accounts.

I agree with the estoppel. Also, the seller should have record of rents received and expenses paid. It should be considered as part of your due diligence process. I would recommend finding RE agent that can help you through some of these details.

Originally posted by @Ryan Cleary :

Though I don't feel great about it, I am in contract for a duplex where one unit is occupied by a long term tenant paying under market rent.  Though I would love to close on an unoccupied property, in this circumstance I would like to keep the current tenants happy (I don't know... I am trying to be a good guy even though Ohio is very easy to get someone out).  

My only concern is that I want to be 100% certain that these tenants are up to date on all rents and that they are paying the amount told.  How do I cover myself here?

I would have your realtor verify with the owner that the tenants are up to date and get some sort of written proof. A listing agent can get in some serious trouble if they misrepresent details of a property! 

@Ryan Cleary it should be part of your due diligence process. During due diligence you want a P+L, leases, and a rental rider. You should be examining and clarifying deferred maintenance through a home inspection, Rental payments, how utilities are split, and reviewing the lease agreement.

As you get closer to close you need tenant contact info, full names, phone numbers, emails, and if you can get it a rental application. Although some of this is easier said than done you should at least ask for it and get a large portion of it.