How do I find out if existing tenants are paying rent?

Question

I'm look at a duplex that have two tenants. 1 is month to month, and the other has 6 months left on the lease. With the stop on evictions, is there a way to find out if the tenants stopped pay the sell the rent? the property is in the Minneapolis area.

thanks a bunch.

Jordan Moorhead · Answer

@David Smith usually not an option if they're in a lease. The owner can offer to buy them out but they don't have to take that.

@Eleazar Aragon you can ask for proof of rent. There are multiple ways they can get this to you. Contrary to media belief, most people are paying right now. I haven't missed one rent payment on the 22 units that I own.

Mack Benson · Answer

I would be sure to include a contingency in your offer that the tenants are paying and are current. If the seller is self-managing, and is a mom and pop owner, the only way I can think of to verify this is with the sellers bank statements. They can redact everything else so long as the dates and amounts show.

If the seller is using a property management company, that property manager should be able to provide you proof during your due diligence.

Corey Hawkinson · Answer

@Eleazar Aragon I agree with the other people saying to ask the seller for proof. It should be very easy to provide. I’m selling a condo now. A buyer asked about payments during a showing. Took me a few minutes to pull up on my phone. Really easy.

Ian Walsh · Answer

Ask for bank deposits from the landlord.

David Acosta · Answer

Hey, @Eleazar Aragon - as mentioned above, I would validate rental payments through bank statements. Cross-reference deposits with the current tenant leases. I would also consider baking in terms to your purchase agreement that would provide monetary recourse should you discover a unit physically (or economically) vacant during your final walk-through. In this case, plan to walk the units a week before closing.

Jon Shoop · Answer

I second these. We haven't had many (if any) missing tenant payments in DFW, Dallas, Fort Worth, etc.

Current owner should be able to provide you with rental collection info contingent to the deal.

Evan Polaski · Answer

@Eleazar Aragon, as mentioned, you can ask for an aging report, bank deposits, cancelled checks, etc. You can also ask for estoppel certificates from the seller, signed by the tenant, confirming both are on the same page with what is owed and the overall terms of the lease.

Rick Martin · Answer

@Eleazar Aragon tell the seller that as part of your due diligence that you need to perform a lease audit, and will need proof of deposits, preferable for the last two years, or at least the length of the current leases.

The current owner would need to negotiate a buyout to deliver vacant. You the buyer could as well, but it can be expensive - especially if they are not month to month.

Mark Ainley · Answer

@Eleazar Aragon I have been advising investors to ask for cleared checks or proof of payment...it is not abnormal these days to request a paper trail for a property you are buying going back 3 months. I saw a landlord the other day request to escrow 2 months of upcoming rent at closing because he had a bad feeling about the proof the seller was showing of rents being paid. They agreed on 1 month but it made him feel a little better about the 1st 45 days.

Eleazar Aragon · Answer

@Mack Benson Thanks. great advice. I will definitely do that.

@David Smith Thank you. I didn't think that was an option. I'll look into that and way the pro's and con's.

How do I find out if existing tenants are paying rent?

How do I find out if existing tenants are paying rent?

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