I recently put a 9-unit apartment building under contract. It was 100% occupied. Two of the 9 units had a lease, but the other 7 didn't and were month to month. I put a contigency in the offer that all the apartments needed to have leases and also 100% occupancy. Today was the deadline and 1 tenant declined to sign the lease and will now vacate the apartment. The rent was $450/month.
I don't know what to do. Should I ask for a concession in the form of cash at closing?
@Frank Jennings are you worried you can't find a new tenant? If so, I'd ask why are you buying the place. If you aren't worried then you could ask the seller for a credit to cover a month or two of rent while you fill the vacancy. Hopefully you can fill the vacancy with a higher paying tenant too. Good luck.
Thank you for the reply. I am not worried about filling it. We were told that it would be 100% filled and with leases, but it turned out they lost one. I am new to this so really my question is it ok to even ask for a concession in this case? Is it common practice to ask for this kind of concession?
@Frank Jennings This type of thing happens a lot in the real estate investing world, whether you are on the residential or commercial side. If you put a requirement in a contract and someone fails to meet the terms, or the situation fails to meet your terms, you can back out. Here in California it is called a Notice To Perform. and the default in some contracts is 48 hours. Meaning the other side is given 48 hours to resolve the issue, and or make good on the terms of the contract.
I'm sure you don't actually want to back out but you probably do want a credit or incentive of some kind. I frequently issue a Notice To Perform when it makes sense and a specific date has expired without something having happened. This can light a fire on the other side, as they probably don't want to lose the deal either. You could just continue forward and say nothing, if you believe you can take care of the problem on your own.
You can ask for anything you want....at risk of losing the purchase....it’s up to you.
BTW, leases are inherently a false sense of security. They obligated You to rent to them for a year......but when They need/want to leave, they just leave.
450 a month is really low in most areas perhaps it is an opportunity to do a little rehab and raise the rent.
All my tenants are MTM I do not offer longer terms; but they all have leases just the same.
Make sure you get the correct settlement at closing-security deposits and last months rent.
These are called verbal lease treated as month to month. So you have only 2 written leases and if they were not recent. It treats as no lease at court.