Hi, my name is Joshua. I'm purchasing a triplex as my first property on the hope of househacking to get the ball rolling. I was scheduled to close today, however my attorney said that 2 of the units are not up to date on the rent. He did not have my additional information so far. Currently, my real estate agent has advised me to wait for the seller to evict the tenants and request the tenants security deposit to cover my loss in income.
I'm would not have co.e up with this plan myself so I am wondering what other alternatives may be available.
Also would anyone recommend pulling out and cutting my loses since there are already problems with the property's tenants.
Hi @Joshua Massarini , congratulations on purchasing your first property! I would have your attorney review the existing leases and explain to you your rights as a landlord. A bad lease can ruin a deal if the tenants are able to get away with not paying rent and little consequence. I'm not sure how tenant-friendly NY is, but I know in DC, for example, eviction processes can be extremely long and painful.
If the tenants are not paying rent, I think that your agent has given you good advice and the seller should evict them prior to the sale. If the seller agrees to this route, you should get moving on leasing the soon-to-be-vacant units ASAP, pending there aren't any repairs needed after the eviction. Be sure to recalculate your cash flow numbers to account for some extra vacancy.
I think you asked, or have wondered, if you should walk on this deal. Can you afford the mortgage and expenses if completely vacant right now? Is financing dependent an the revenue from those units? Does the area have occupancy problems? How much capital reserve will you have after closing? Answer those questions for yourself and you will know what to do.