Should I buy a property with non paying tenants
Most Popular Reply
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
5yBuy the properties? Yes - but only under the condition that the properties be delivered vacant at closing. To do otherwise gives you the joy of having your new acquisition come with legal fees, court costs, property damage, and no cash flow.
Buy the property - not the seller's problems.
35 Replies
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes5y
Hey Rob, in this time of unprecedented times I would advise to look at options that would protect you. First if the deal is really good for you I would sign a deal with contingency to close in January 2021, reason for the federal government eviction moratorium will expire 12/31/2020 but that’s not saying they will issue an extension. So I would wait to close 1st or 2nd week of January. Second you may put a contingency on the owner to do their job to give you a free and clear property with no squatters. This will push the owner to do their job and evict them. Or third you may contact a local lawyer and ask about the laws in place for eviction in your area due to Covid and see what they say if there is a possibility to evict them ask them what will The overall costs will be and you may present that to the owner. In one way or the other non paying tenant is like an item in a sellers disclosure they need to tell you the tenant is non paying and basically it’s their problem and they are basically trying to pass it on to you to get rid of their problems. If this was pre-Covid I would tell you to buy it and deal with the eviction process but for now you need to do your due diligence. I own properties in Detroit and have a tenant that is taking advantage of this whole COVID situation and hasn’t paid rent for over a year now that’s right over a year. Since I filed eviction in end of 2019, Covid hit and the city of Detroit closed all public offices, no evictions allowed. After all This time finally the judge issued a program that the city of Detroit has that pays landlords to stop eviction of non paying tenants. I got lucky I received all of my back rent in a lump sum from the city and I now have the opportunity to evict her in January 2021, which I have files and ready to go. So here is my personal experience and I telling you a head of time what might happen only because of this pandemic. Good luck man and I hope it becomes a great deal for you!
- Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes5y
Buy the properties? Yes - but only under the condition that the properties be delivered vacant at closing. To do otherwise gives you the joy of having your new acquisition come with legal fees, court costs, property damage, and no cash flow.
Buy the property - not the seller's problems.
- Member since 2019 · 248 posts · 248 votes5y
Depends on the price! One of the reasons the property is probably up for sale is the landlord (like so many on these boards are about to be) is tired of dealing with the hood, has no skills in the hood or underestimated the hood. Buy the property and get them out. If all these landlords are just taking it on the chin with this covid mess they deserve it. If you don't have ways of removing people from your properties without the courts you have no business owning rentals and you deserve to lose your investment.
- Rental Property Investor · Concord, NC · Member since 2016 · 1k+ posts · 3k+ votes5y
Originally posted by @Paul S.:
If you don't have ways of removing people from your properties without the courts you have no business owning rentals and you deserve to lose your investment.
I guess I deserve to lose my investments. What are the 'ways' you speak of other than lease termination, cash for keys, and the eviction/court process?
- 5yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Patricia's advice is good. If they won't deliver it vacant, knock a bunch of money off the price to more than cover the rent for a year as that is how long it will take you to get rid of the tenants and even then only if the place is in good shape. Once you buy it, you can offer them cash for keys-basically tell them if they are out in 30 days and leave the place in good condition, you will give them $X after they are out. Also make sure you get the deposit from the seller.
- Rental Property Investor · Barstow, CA · Member since 2015 · 131 posts · 102 votes5y
These people are probably willing to sell because they do not want to deal with the problem. Are you a real estate problem solver? If you are you will find out what it takes to solve the problem in other words your due delligence, then find out what it will cost to solve the problem plus what you want to charge to solve their problem and bingo that is how much you offer. Good luck to you
- Investor · Philadelphia, PA · Member since 2010 · 739 posts · 372 votes5y
If you’re buying cash and the numbers are so good it makes sense just to wait out the eviction, do it. Thinking about buying a few myself
- 5yKenneth GarrettPro MemberInvestor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
@Patricia Steiner is spot on. I would not buy with non paying tenants. Depending on your state and or cities rules on evictions you might get stuck for months with no income and no legal way to get them out. The CDC ban on evictions ends 12/31, but who knows if it will get extended. In my state of Illinois, the governor has had a no eviction ban since March. He extends it each month. Unfortunately until the vaccine becomes available to all of us, I anticipate he will extend it to January as well. Just waiting on the new executive order.
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes5y
In a normal landlord/tenant environment I would say do not give up on a property because it has non paying tenants, but these days with the executive orders the way they are you have to seriously think if it is something you want to deal with. Simply put, it’s not a fair playing field right now.
- Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes5y
@Paul S. hey I like your post but I’ll rather keep my money then spend it on legal fees! The hood is great investments but when you have the “hood” city backing the tenants you can’t just throw them out. I offered $1500 for the last to move out that’s 2 months rent! She’s not dumb she knows the system and plays the system. Did you just hear the news??? The hood won’t be paying their water bills until 2022 and if you can’t pay for it the hood will keep it on. Who’s going to pay for that? The suburbs! Macomb, Oakland and other rich counties to keep Detroit alive. I’m not saying investing in the hood is bad but when you have a clever tenant that knows how to work the system your in for the long haul. I’m not a slumlord by no means everything she requested I offered or replaced. She put my property on the news stating the property wasn’t city certified how can she do that when she is a non paying tenant, she then called the city boys to come by and give me violations on not have a rental cert. I ordered my PM to go out and do what’s needed to be certified through the city when he got there she said she had Corona so you tell me how to deal with that? She was complaining the roof was leaking which it wasn’t, I had plans to replace the roof but in a couple of years I ended up call my roofer and told him to replace the entire roof. $4200 job, that’s a whole year of rent (almost). She then started looking at other items. I have been going back and forth with the city judge to get this lady out. I pay my taxes and made that house look good rebuilding Detroit right???? How would any investor be interested in investing in a city that only listens to the tenant? I told the judge don’t bite the hand that feeds you. I guess that changed his thoughts and offered the EDP program to get money for the landlords. Detroit has a history but for it to prosper they need to start being more business oriented, giving out free water answer not allowing evictions only makes property owners run away or like history shows no property taxes paid, that creates a very vivid future for the city.
- Property Manager · Williamsport, PA · Member since 2020 · 93 posts · 74 votes5y
If you feel you can handle the non paying tenants and all the eviction activity that can require, especially in this environment of eviction moratoriums you may have a great deal on your hands. If you are confident you can clean this situation up, make an offer for delivering the building vacant or you take it with tenants in place. Obviously the latter is significantly discounted. What is great about that is it communicates that this asset as is isn't worth many people buying. If you can handle it you should get it at a deep discount. Or they can clean up their own problems and sell it for more.
- Member since 2019 · 248 posts · 248 votes5y
Originally posted by @Arsen Atanasovski:
@Paul S. hey I like your post but I’ll rather keep my money then spend it on legal fees! The hood is great investments but when you have the “hood” city backing the tenants you can’t just throw them out. I offered $1500 for the last to move out that’s 2 months rent! She’s not dumb she knows the system and plays the system. Did you just hear the news??? The hood won’t be paying their water bills until 2022 and if you can’t pay for it the hood will keep it on. Who’s going to pay for that? The suburbs! Macomb, Oakland and other rich counties to keep Detroit alive. I’m not saying investing in the hood is bad but when you have a clever tenant that knows how to work the system your in for the long haul. I’m not a slumlord by no means everything she requested I offered or replaced. She put my property on the news stating the property wasn’t city certified how can she do that when she is a non paying tenant, she then called the city boys to come by and give me violations on not have a rental cert. I ordered my PM to go out and do what’s needed to be certified through the city when he got there she said she had Corona so you tell me how to deal with that? She was complaining the roof was leaking which it wasn’t, I had plans to replace the roof but in a couple of years I ended up call my roofer and told him to replace the entire roof. $4200 job, that’s a whole year of rent (almost). She then started looking at other items. I have been going back and forth with the city judge to get this lady out. I pay my taxes and made that house look good rebuilding Detroit right???? How would any investor be interested in investing in a city that only listens to the tenant? I told the judge don’t bite the hand that feeds you. I guess that changed his thoughts and offered the EDP program to get money for the landlords. Detroit has a history but for it to prosper they need to start being more business oriented, giving out free water answer not allowing evictions only makes property owners run away or like history shows no property taxes paid, that creates a very vivid future for the city.
I'm sorry for your situation - every prospective buyer for Detroit should read your post 100 times before considering to buy. EVERYONE that invests in Detroit will go through the same scenario more often then they'd like.
What is happening to you is illegal - you have to decide to eat it or take action. I stopped buying single families years ago because a forced eviction is harder than a multi fam with secured basements. The courts are not going to help you. When there is no covid landlords need to stop filing 7 days with a money judgement! Tenants know if they say ANYTHING is wrong with the property the judge will order an inspection and tie up the process for weeks/months. Just file your 30day (preferably backdated to save time) to recover possession of the property and the judge has no leeway but to give the tenant 10 days to vacate - no talk of rent, repairs, certificates...anything. You are not going to get the back money so why muddy up the eviction?
With covid getting the rats out: I usually handle my evictions case by case. I've had people come to me hat in hand and say I lost my job, I want to talk to you up front... I'm doing everything I can to recover, I will communicate with you often... these people I give as much time as they need. I have many units so I can let a tenant slide if they REALLY are on hard times. I had a lady lose her job and text me once a week for 8 months! She was a good tenant so I let her slide. 8 mo later she got a great job and her fat tax check and she was caught up in 3 months.
The other side of the coin is the mouthy tenant you hate that can't pay cause they spent their rent money going to vegas for his/her birthday even though they don't have a pot to piss in. Upon asking for the rent a short argument ensues and they utter what they think is the conversation ender "TAKE ME TO COURT" (anyone owning in Detroit has had this pulled on them) Hood evictions are a bit easier in multis like I said due to the fact I secure the basements. After the magic words are spoken the power and gas are shut off. 90% of the time this gets them to pay or go. If sitting in the dark and cold doesn't work in the rare circumstance I have to go to step 2 and the front door of the unit is removed. Even the locals are scared to lay their head in a spot that's open to everyone - plus the neighbors always seem helpful to chip in with the cleanout lol. For single families you have to switch it up - if the gas meter is on the outside remove it. Have an electrician disable the meter box from the outside or in extreme cases have a pole cut done. DTE is not going to do this for you - you have to have a hood guy do it. Cut the water from outside (but they'll probably know how to turn it back on) If that fails remove the door as above.
There is a reason Detroit is a baron wasteland. There is a reason Detroit is always in the top 1 or 2 in crime statistics. There is a reason properties are cheap. For these reasons you have to adjust your investment style. You cannot treat your 2 family on Joy and Dexter the same as your 2 family in Royal Oak. If you are not willing or able to do the things needed in this environment to protect your investment and make money you should stay in your safe space.
For those that will respond: "What you're doing is illegal!" I tell you the same thing I tell the deadbeat tenants - an illegal eviction is a civil matter TAKE ME TO COURT!
- Investor · Raleigh, NC · Member since 2019 · 433 posts · 743 votes5y
Lots of good points on this thread. I'm following for the experience, as I've run into the situation but never acted on the deal. Sounds like there are overall 2 paths. 1) Let it go because it might now be worth the trouble or 2) Be the problem solver.
If we entertain being the problem solver, sounds like you could move forward with the deal where you have the costs of lost rent, repairs and lawyer/court/eviction/etc. fees baked into the purchase price by knocking down the price. You could present the deal as "I'm going to take this problem off your hands, so you don't have to lose money on it anymore. In return, I'd like to negotiation the price to X."
I think another factor we have to consider is how long it would take to recoup the investment. If you have deal that you might have to pay more for upfront in purchase and rehab, but you can refinance and recycle funds in 6 months, go with that one since it doesn't have the tenant issue and you can do another deal quickly. If on the other hand you have this deal, and there is uncertainty with how long it will take before you can recycle your funds, it may not be the best deal.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes5y
We live in crazy times. The eviction moratorium is almost guaranteed to be extended through most of 2021. I would calculate 12 months worth of rent price into my offer as a discount on the price. I say that because it could take a year to get the tenant out of the property. I would level with the seller and explain the reality of their situation. You are taking a problem off their hands, but there is no reason you should bear the expense.
- La Vergne, TN · Member since 2016 · 93 posts · 28 votes5y
@Arsen Atanasovski.
Thank you for your input, this is helpful
- La Vergne, TN · Member since 2016 · 93 posts · 28 votes5y
@Terrell Garren
Use a method the will work for you. Also try to rent by room if your zone will allow.
- 5yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Man, @Paul S. woke up with some moxy today!
Logical Property Management4.9458 Reviews - 5yCalvin OzanickBusiness MemberProperty Manager · Janesville, WI · Member since 2017 · 707 posts · 297 votes
I would say in a normal time, go ahead and take care of the issue yourself. However, these times are far from normal. Your only saving grace with the current state of evictions would be if the lease is month to month. Then you could just terminate the lease, and if they fail to leave you can evict on those grounds. However, if that is not the case, I would proceed one of two ways. If the deal is great, you love your numbers and can handle hanging on to the unit with lesser or no income for a bit, then I would say you are safe to go for it. A better option would be to push out the closing as far as humanly possible. You can write an offer and set a close date in February if you wanted to be aggressive with it. Either way, be wary of the courts right now as there is a good chance eviction moratoriums are extended once again.
Wisconsin Property Managers4.7413 Reviews - Rental Property Investor · Wilkes County, NC · Member since 2019 · 56 posts · 39 votes5y
No way would I do that, unless you also want to buy an eviction process.
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes5y
@Rob Lee
All good advice above, I’ll just add it does seem like this is becoming more and more available nationally and I’d definitely say proceed with caution.
- Investor · Matamoras, PA · Member since 2015 · 111 posts · 32 votes5y
Yes, use the fact that there are non-paying tenants and current evictions as leverage to reduce the asking price 20-30 % or more.
Then hire a eviction attorney to evict the tenants or possibly offer a contract to the tenants to pay then to leave. "cash for keys"
- Investor · Memphis, TN · Member since 2016 · 549 posts · 286 votes5y
Do not take on sellers issues with tenants, especially with the challenges we are facing in 2020. Many of courts wont allow evictions until next year and who knows it may get pushed out even more. Cash for keys is the best way to get the tenants to leave but let the seller try to do that not you. If the properties are a good deal you should buy them but cover yourself in the contract so you have a way out. Advise the seller you are willing to purchase but only if they can deliver vacant.
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