triplex owner wants to stay, Less than 30days before closing

Multi-Family and Apartment Investing
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triplex owner wants to stay, Less than 30days before closing

Geoffrey Schaeffer
Beloit, OH · Member since 2016 · 49 posts · 13 votes

Greetings Everyone,

First I would like to say thank you to everyone and all the knowledge that has been posted here, this site has been a great tool to use. 

My wife and I are closing on a triplex that was owner occupied, during the contact write-up the owner wanted to stay there for 30days after closing (for free) if he chooses to stay after the 30days he will rent for $550. (which is about $50-$100 under market). We agreed to this as the owner is very well settled and has lived there for 20+ years and we wanted a smooth transition.

Our realtor called last night and the seller is having a major surgery done in the next few days, the seller is asking to reduce rent ( to around $450) in exchange to help manage the property like mowing, adding salt to the softener.

I am very against this idea, it was the seller who wrote in the 30days for free and under market rent, which I think is very nice of me to agree to, I do not want the liability of him getting hurt while mowing, shoveling snow and such, also if he does these duties it gives the appearance that he is still in charge of the property and I do not want the other tenants to get that idea. I am not sure why he would want reduce when he is getting listing price of the property. We wanted to buy this property for the cash flow, not a charity handout.

My realtor advise me to think about the decision for a few days as we both want this sale to go smoothly as the seller has had cold feet before.

We live out of state but go to the area about once a month to see family.

What you do in this situation? keep to what was agreed to in the contact? Let the seller perform some duties for reduce rent(against this)? Let the seller rent for reduce amount with NO duties?

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Mike CumbieBusiness Member
REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
9y

@Bryan O.,

Just how long is he expected to allow this person to live there at under market rent to be "ethical"?

2 months/5 months/3 years/until he sells?

 
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  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    I suggest sticking with the contract. I am not a fan of him being able to stay at a reduced rent in the first place. Much less an overly reduced rent.... for manual physical labor after surgery. If he backs out he backs out, have your lawyers go for getting cost of DD covered. It is not in your best interest to be renting out a place to a former owner acting like he still owns the place while you hold all the risk.

    Just my 2 cents and good luck!

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  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    Or there is agreeing to his request and then 5 minutes after you close give him notice of non renewal (Assuming you are going month to month with him and not some lease). Do not agree to a lease with a term at a reduced rate at all. Odds are he will be quite upset, but as you said this is a business. He just wants to keep every penny of cash flow he can at your expense.

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  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    9y

    @Geoffrey Schaeffer..He might be having a hard time leaving the place after 20yrs....Whatever you decide, make sure it's in the contract. Consider the reduce rent without duties..

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  • Account Closed
    Investor · Chicago, IL · Member since 2016 · 105 posts · 58 votes
    9y

    @Geoffrey Schaeffer this sounds like a major red flag. I'd stick with the contractual obligations and nothing more. If he backs out you can either sue for performance or move on to the next deal. Either way, I wouldn't give into those kinds of terms.

    1Reply
  • Bryan O.
    Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Geoffrey Schaeffer I would not change the terms. As was mentioned, if he is having surgery and can't move how is he going to maintain the property? I would stick to the contract.

    @Mike Cumbie I thought Realtors were supposed to hold to a higher ethical standard. Agree to it to close the deal, then give him a notice to non-renew immediately? Not ethical, and not cool.

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  • Geoffrey Schaeffer
    OP
    Beloit, OH · Member since 2016 · 49 posts · 13 votes
    9y

    Thank you to everyone who replied, it's always nice to get second opinions and feedback from other sources.

    0Reply
  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    @Bryan O.,

    Just how long is he expected to allow this person to live there at under market rent to be "ethical"?

    2 months/5 months/3 years/until he sells?

     
    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Inherited tenant usually turn out bad, inherited tenants that are the previous owners are guaranteed nightmare tenants. They never let go of their "ownership" and will end up interfering with your business practices.

    Terminate asap after closing and move on.

    1Reply
  • Bryan O.
    Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Mike Cumbie that is why you either put it in the contract or don't. You don't wait until "5 minutes after you close" to terminate them. Doing that just to close the deal is unethical and bad business practice.

    He isn't expect to let him live there any longer than what they agree on, at the agreed rate. He just needs to be clear upfront what is happening. In your scenario, all you did was screw the seller, which may lead to him damaging the property and forcing the new owner to evict which also screws the owner. The only one who wins is you when you collect your commission and slink away. Not a win and certainly not an intelligent path forward.

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  • Mike CumbieBusiness Member
    REALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
    9y

    @Bryan O.

    My first recommendation was to in no way to let him stay in the first place, the next was let the guy back out and go for the money you have invested legally. Thirdly I gave the next best option which is get him out immediately after closing. The fourth option is to let him stay a year or so and the fifth option would be to just let the guy stay there forever.

    The options are in order of the best to the worst for this buyer. If you can make a better logical sequence for him then go ahead. Get it in writing is not a plan, it is a result. You have chosen to attack my ethics as well as to attack me personally in two posts on this topic. I have no problem disagreeing with someone but people who make personal attacks are not the type I wish to have conversations with.

    I wish you the best.

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  • Geoffrey Schaeffer
    OP
    Beloit, OH · Member since 2016 · 49 posts · 13 votes
    9y

    greetings everyone,

    Just wanted to update:

    After we closed the old owner stayed and moved out last month :). We had a few head aches...he lived and grew in this triplex for over decade so of course everything we did was WRONG. We started by making the property to have less maintance, we removed trees, shrubs and redesigned several out door living spaces. My lawn care service was weekly, apparently that wasn't enough and he even spoke to them and tried to correct them!

    Last month he moved, the unit was in really great shape, just repaint a few walls and cleaned out. No concrete in the toilet or sledge hammer marks on the counter top. In less than 5 days it was showed and rented (for 50 bucks in rent than he paid). So far everything has been expected and the cash flow has been above projected.

    Thank you everyone! 

    1Reply
  • Debra Grumbach
    Frisco, TX · Member since 2017 · 201 posts · 95 votes
    9y

    glad it worked out!

    0Reply
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