Purchasing Multi-Family or Apartments

8 Replies

Would like to know if purchasing a 4 suite apartment with tenants already in them is a good Idea. If the owner agrees to owner financing.  I was thinking I could pay him with the money from the tenants he has chosen. And then how would I handle replacing tenants if I needed too?

Originally posted by @Randy Campbell Sr :

Would like to know if purchasing a 4 suite apartment with tenants already in them is a good Idea. If the owner agrees to owner financing.  I was thinking I could pay him with the money from the tenants he has chosen. And then how would I handle replacing tenants if I needed too?

 You have not provided enough information. To help we would have to know about the specifics of the deal. Purchase price, down payment, seller financing terms (30 year amort? interest rate? bubble?), gross rents. We also need to know about expenses including utilities, maintenance, capital expenditures, lawn care, taxes, insurance, vacancy loss, etc. It would also help telling us the class of building and neighborhood. Is this located in a high end neighborhood? ghetto? somewhere in between?

I purchased both of my 4 plex buildings fully occupied, and had to get rid of tenants almost immediately. Since they were all on month to month and did not have a current lease, it wasn't hard.

You need to do your due diligence on the tenants. Anyone can get tenants but getting good tenants is a little more difficult. There are plenty of turn key vendors on here that are reputable and have good tenants. But, I would still check them.

thanks Anthony and Adam. I would have to do more research to get the info I understand. I was actually looking to see different opinions on buying with tenants as opposed to without tenants. 

Originally posted by @Randy Campbell Sr :

thanks Anthony and Adam. I would have to do more research to get the info I understand. I was actually looking to see different opinions on buying with tenants as opposed to without tenants. 

 Oh okay. Well I strongly prefer buying with tenants, even if you may have to remove some of them later. I like cash flow from the very beginning. It takes a lot of time and effort to get a building fully occupied. While you are doing that, you could possibly be cash flowing negatively. I really don't like paying my mortgages with my money. 

The downside to that is that you may be stuck with tenants who suck because they have a while before their lease expires. You may also have tenants paying less than market rents, meaning that you are suffering loss to lease.

The upside to the building being empty is that if you want to do a rehab, all of the units will be empty, making it much easier to go in and fix every little problem. This also will allow you to rent to only the tenants that meet your standards. My issue is that a lot of landlords lower their standards after a few months of being unable to fill their units and paying that mortgage out of their pocket.

I have purchased a 3 family with tenants and a 2 family without tenants. Honestly either way works and my next investment is a 4 family that is fully rented, I will be closing in 8 days. 

Without tenants, you go in renovate quickly and rent it fast.

With tenants bring a good property Management plan to train your tenants to pay rent on time and what your house rules are. Training tenants is more work, but at least the rents are already coming in.

Happy investing!

Yes, it is a very good idea. If you structure the deal right, you'll be cash flowing on day one. (Everything else stated above about due diligence is good advice too.)

Thanks everybody this is very helpful for a rookie like me. Now if there r tenants already would I have the right to do my own background checks and if so can I evict if I buy and find something I don't like..ie past evictions or late pay. Or does the tenant have the right 2 finish out the lease b4 I as a nee owner can evict?

As a contingency, you could request a copy of the leases that are in force.  You could also request a tenant estoppel to get you more comfortable with your purchase.