Does occupied property deter investors?

Question

What about tenants who come with the property?  Does it cause concern for potential investors, or is it considered a good thing to have tenants in place?

I'm a broker, but new to wholesaling properties.  Not sure what's the prevailing wisdom.

Thanks,
Jill Good

Rich Weese · Answer

I have always rehabbed, rented and re-appraised home prior to selling to investors, and continue to do the same thing now. Fully managed and complete turn-key. I've found that many investors don't want to be  involved in day to day RE decisions. My investors are mostly upscale. Rich

Jill Good · Answer

Right Jeff, that's certainly my sense about it too.  There are predominantly Section 8 apartments in this particular area, with some good solid tenants and some not so much.

I think my first hunch, at least about rehabbers preferring vacancies, was correct.  The reason I've had a hard time moving on from this particular property is that the roof and systems are all less than 2 years old so, minus the one not so good tenant remaining, it's just brushing up the kitchens and baths left to do.  The property itself is a good value, but the lingering tenant really holds me back.

Hmmm.  Thanks again, Jeff!

Cheers,
Jill

Jeff S. · Answer

I really depends upon what you’re selling, Jill.  Those buying for cash flow, such as apartment building or turn-key SFR buyers, will usually prefer to see quality tenants in place.  Those buying wholesale properties in need of rehab will not want to close on a property and then have to go through a lengthy eviction process, or pay cash for keys, before they can begin construction.  No flipper I know will close on an occupied property.

Jill Good · Answer

Curtis, that's great info to have, and it makes perfect sense.  What I'm currently seeing are singles and multis not larger than 3 units, which is probably where I feel most comfortable starting since I've brokered a number of sales of this size.

Thanks for the post!

Best,
Jill

Curtis Gabhart · Answer

It depends on a number of factors.

When we sell buildings that are 5+ units it's important to be occupied.

1-4 units I like to keep vacant (if rehabbed) to make it easy to show. I will usually have a rent survey done and am also willing to close escrow with tenants in place.

That way if someone wants to put there own tenants in place they can after we close or if they want it turn-key I can take care of it. The key is making it easy to show the units.

Jill Good · Answer

Good to know, Greg.  As a broker, I've usually advised my clients to start clean with a vacant property.  But in this new wholesaling environment, I've been unsure if that advice still makes sense when I'm looking at deals to flip to investors.

Thanks for the feedback!

Cheers,
Jill

Greg B. · Answer

When I first started I was not sure of how to fill a rental and was fearful that no one would rent my stuff.  My first property was bought with tenants in place.  Many rental units later, I would prefer to start with a vacant rental and put my own people in there.

Does occupied property deter investors?

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