Purchasing property with no lease agreements

[Pete Harper]

I’m looking at a distressed property that has four of six units occupied. Two units are paying only $400/month for 3 bedroom, 1 bath. The other two are not paying anything. The seller is very eccentric to put it kindly. In negotiations he says he has no lease agreements with any of his tenants, not willing to provide any records or other documents.

How would you handle this situation? I’m likely to need to evict the non paying tenants straight away. I’ll try cash for keys first then go to court if needed. This is in Landlord friendly Texas so I’m not too concerned with evictions. The other two paying tenants are $300 under market rent even taking into consideration the condition of property. I usually try to honor existing lease agreements but in this case there is nothing in writing. Do I give the paying tenants 30 day notice of rent change to market rent? The remaining two units I plan to fix up and rent at market rent.

Any recommendations?

[Evan Polaski]

@Pete Harper could be an opportunity.  I agree with @Ujwal Velagapudi in asking that it be delivered vacant.

If that is not possible, I would anticipate the downtime and cost of evictions, even without a lease.  Cash for keys is always a great option. You might be able to get them out quicker via any squatting/trespassing laws since there is no agreement in place, but likely formal eviction is needed.

As for trying to keep them, I would general recommend you don't. The feeling I get from reading you post is that a) they won't be able to afford market rents and b) could be a big hinderance getting the 2 vacancies rented.  Of course you will likely need to provide notice of rent increase first, then when they don't pay post notice of eviction and follow laws to get them out.