Inheriting tenants for the first time
Member since 2024 · 3 posts · 0 votes
Inheriting tenants for the first time
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Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes
6moAbsent any useful documentation, such as a Move in Condition checklist, Courts make the assumption that the unit is in the same condition now as then. You get to return it all to the Tenants. Even trying to deduct for cleaning will be difficult to prove, unless they leave the unit littered with rubbish or serious filth. Were the Security Deposits transferred to you at closing? Do you know, based on existing written Rental Agreements or Estoppel Certificates who they belong to?
10 Replies
- Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes6mo
Absent any useful documentation, such as a Move in Condition checklist, Courts make the assumption that the unit is in the same condition now as then. You get to return it all to the Tenants. Even trying to deduct for cleaning will be difficult to prove, unless they leave the unit littered with rubbish or serious filth. Were the Security Deposits transferred to you at closing? Do you know, based on existing written Rental Agreements or Estoppel Certificates who they belong to?
- 6moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 917 votes
Quote from @Lauren Rowe:
I just closed on a quadplex this week and this is the first property that I have inherited tenants. We usually buy vacant fix it up then rent it out. I’ve obviously done my research on what needs to be done when inheriting tenants but I’m wondering if there’s anything I should know that you’ve learned from experience? One thing that I wasn’t able to figure out is with security deposits I don’t know what condition it was in when they moved in. So when they move out how would I know if they get it back or not? We have a move out in May.
Congrats on the quadplex, big milestone. Inheriting tenants is definitely a different game, but it’s mostly about setting expectations early. Since you don’t have original move-in condition reports, treat the upcoming move-out with extra documentation: take tons of photos, videos, and compare against normal wear-and-tear standards rather than trying to guess what it looked like years ago. Also, spend a little time meeting each tenant, getting a feel for who pays on time, who’s communicative, and who might need firmer structure. Inherited tenants can actually be great if you build trust fast, and this first turnover in May will give you a clean slate moving forward.- Member since 2024 · 3 posts · 0 votes6mo
@Arman Ahmed I appreciate your helpful insight. Thank you!
- 6moG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 2k+ posts · 852 votes
Did the seller provide any records on deposits or condition reports at closing?
For security deposits, you’re essentially stepping into the previous landlord’s shoes, so whatever they collected and documented carries over. If you don’t have move-in condition reports or photos, it gets harder to justify deductions later, so it’s usually safest to assume limited deductions unless damage is clearly beyond normal wear. Going forward, I’d do a quick walk-through of each unit now, document everything with photos, and communicate clearly with tenants. That protects you on the next turn. Inherited tenants can be your biggest asset or headache depending on how that transition is handled.
- 6moMike PaolucciBusiness MemberRealtor · Columbus Cleveland Dayton, OH · Member since 2022 · 492 posts · 550 votes
Quote from @Lauren Rowe:
I just closed on a quadplex this week and this is the first property that I have inherited tenants. We usually buy vacant fix it up then rent it out. I’ve obviously done my research on what needs to be done when inheriting tenants but I’m wondering if there’s anything I should know that you’ve learned from experience? One thing that I wasn’t able to figure out is with security deposits I don’t know what condition it was in when they moved in. So when they move out how would I know if they get it back or not? We have a move out in May.
When inheriting tenants, be ready to assess each of the maintenance / upgrade requests they make. Tenants will generally look to new landlords to make certain repairs / updates that the previous owners weren't willing to make. Happens every time. That's a good opportunity to establish boundaries / set expectations with your new tenants.
When it comes to the security deposits, I'd assess the units as the same way you would a tenant that you placed yourself. If there's clear signs of tenant damage (holes in walls, broken cabient doors and other obvious items) then treat them like you normally would.
Reafco - Mike Paolucci 512 Reviews - Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes6mo
When acquiring an occupied unit, always request, in the purchase offer, copied of current rental agreements, current rent roll, current delinquency report, Security Deposits held, and confirm if there are, or are not, any subsidized (S8) Tenants. Sellers will need to notify S8 of change in ownership and the effective date in advance so they will hold payment and pro-rate appropriately based on actual closing date. Any rents paid to Seller can be very difficult for S8 to get back, and equally so for you to collect. You also need to notify S8 of your new Ownership and submit the appropriate form for approval before they will send ANY rent to you.
Once your offer is accepted and contingencies cleared, provide the Seller with basic contact info for them to provide to all of their Tenants as a brief introduction. Once they have done so, and closing is imminent, you can then send the Tenants your own letter of introduction with further details for service requests, how and where rent payments are made, and instructions to contact you for scheduling a walk through inspection of their unit, with a deadline for doing so.
At the inspection, you need to thoroughly inspect every room, every closet, every sink base cabinet and other storage areas looking for any signs of water intrusion that you will need to more fully investigate later. Once you have inspected, spend time with the Tenants confirming (by asking, not telling) what their current rent and Security Deposit are; what utils are they paying; what appliances are theirs; what previous maintenance requests were not completed; and, for multi-fam properties, what vehicles are theirs and where do they park?
Ask what their future plans are...do they plan to move in the summer, or first of the year, or, are they happy and plan to stay long term if possible? Do not discuss rent or anticipated renos at this point. Simply advise them you need to study the market, evaluate your findings from all of the inspections and local market, and then make decisions and make offers to approved residents. Provide them a Rental Application for ALL adults to complete in full (I never charged for applications of existing Tenants) and return to your office with a deadline. NOTE- you must follow the existing terms of any valid, written, agreement, although you can change Where and to Whom they make rent payments to. That agreement cannot be terminated prior to the stated end date, but that does not preclude you from informing them you WILL be terminating the prior agreement at it's stated end date, regardless if they plan to stay or move, so their terms will be updated and consistent with your standard practice.
Only when you have all of the data, including a full current background check, and have developed a potential project plan should you send them either a Notice of Termination (effective at least the minimum required notice period per Local Law, or 60 to 90 days with the promise of 100% Security Deposit return and rent pro-rated to last day of occupancy based on return of keys IF unit is left broom cleaned with all rubbish and personal property removed from the unit and from the exterior/curb) OR a Letter detailing the terms you are offering and providing a copy of your new Rental Agreement and related Policies, with instructions to schedule a meeting to review and sign, again with a deadline to do so.
Then meet, review page by page the critical sections and terms, all additional documents, policies such as either allowing Pets, or No Pets with a separate Assistance Animal Policy; House Rules for multi-fam properties; parking rules; Procedures and pick up days for routine rubbish; Move Out Cleaning Guidelines; Lead Based Paint form and booklet; Info on Mold and cleanup; and anything else relevant to the property or Local Law.
- 6moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Lauren Rowe:
I just closed on a quadplex this week and this is the first property that I have inherited tenants. We usually buy vacant fix it up then rent it out. I’ve obviously done my research on what needs to be done when inheriting tenants but I’m wondering if there’s anything I should know that you’ve learned from experience? One thing that I wasn’t able to figure out is with security deposits I don’t know what condition it was in when they moved in. So when they move out how would I know if they get it back or not? We have a move out in May.
Why didn't you require for the MoveIn Checklists from the seller?
You'll need to check your state laws to determine repercussions.
You could also ask the tenants for a copy of theirs. To try to thwart and fraud from them, you could state you want to update what you got from the seller.
In general, you should create and send a TakeOver Questionnaire to the tenants.
- We've caught seller frauded leases, ledgers, had tenants rat themselves out with pets and additional occupants, etc.
- We've also had tenants ID deferred maintenance issues missed by inspectors, which we were able to use to extend leases & increase rents by negotiating to take care of them.
Logical Property Management4.9458 Reviews - 5moBryon AndrewsBusiness MemberReal Estate Agent · Saint Paul, MN · Member since 2018 · 201 posts · 104 votes
Congrats on the purchase! As a fellow investor here in the Twin Cities, if I have an inherited tenant, I assume I will be giving them their security deposit back. This may or may not be the best way to go about this, but it works for me. I have yet to receive a check-in sheet from an inherited tenant or seller in all of my acquisitions. Depending on the size of the security deposit, I find it to be a cheap expense to ensure a smooth turnover. Now, if the unit is trashed since my taking over of the property, that would be a different story. I have yet to have that issue however. Keep in mind any local and state laws around security deposits.
- 4moAdam TafelBusiness MemberReal Estate Agent · St. Paul, MN · Member since 2017 · 577 posts · 395 votes
It’s a bit too late since you’ve already closed, but you can always get all parties to sign estoppel agreements while pending. We don’t see these often in the 2-4 unit world but occasionally if things feel a bit squarely during due diligence we will request them. I haven’t seen one of these lay out original condition in the past, but I’m sure you could get creative on the next deal and add this to the form.
I find that most inherited tenants do NOT work out in the long term, but I’ll still keep an open mind and give someone the benefit of the doubt. Perform a walkthrough right away post closing, document the condition, and you at least have a baseline. Check the local and state laws, plenty is changing regarding the way we deal with deposits and walkthroughs, avoid renting to any attorneys (lol).
Best of luck!
Upside Property Sales 4.9108 Reviews - Realtor · OH · Member since 2026 · 122 posts · 77 votes4mo
Quote from @Lauren Rowe:
I just closed on a quadplex this week and this is the first property that I have inherited tenants. We usually buy vacant fix it up then rent it out. I’ve obviously done my research on what needs to be done when inheriting tenants but I’m wondering if there’s anything I should know that you’ve learned from experience? One thing that I wasn’t able to figure out is with security deposits I don’t know what condition it was in when they moved in. So when they move out how would I know if they get it back or not? We have a move out in May.
To protect yourself when inheriting tenants without a move-in checklist, you must immediately execute an Estoppel Agreement where tenants formally confirm their deposit amount and document any "pre-existing" damages. This creates a legal baseline for your ownership, and for that May move-out, you should prioritize a clean transition—if you can’t prove the damage happened during your watch, treat it as inherited wear and tear to stay focused on the larger goal of stabilizing the asset. I hope that helps.
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