How do I make this deal happen...?

4 Replies

I am new to fix and flipping, although have been investing in buy and hold properties.

Recently, ran into someone who is a landlord wanting to sell his place due to the job he has landed, and decided to accept in a foreign country. He will be wrapping up everything and will be moving out of US in next couple of months. He is one of those accidental investors that we always read about.

Here are the details about the property...

ARV - $260,000- 265,000

Possible deal - $200,000 - $210,000 (Nothing in writing yet)

Repair - $25,000, 30,000. (The place has been extensively used by tenants for last 10 yrs. I am going a little conservative by going a little higher on this amount)

Here is the issue with the property. The tenant's lease is another 6 months. The owner would like to see this deal take place before he leaves the country, as he said he doesn't want to have any pending business once he is gone. The tenant is pretty upset that the owner is selling, and scared the the "mean investor" will be kicking him out. 

For me, I plan to purchase the property with hard money. If I inherit the tenant, I will have to potentially wait for 6 months before I can start any major repair. There is no way I can be doing major repairs with the family living there.

Other than making a nice offer to the tenant (perhaps 1 month's rent), and hope he takes it, what other ways I have go make this deal happen? If this is the route I take, how do I make it happen? Do I do a 3 way agreement with the tenant, seller, and myself for him to vacate the premises and make the offer to purchase contingent upon the tenant leaving? Has anyone dealt with this?  

The larger question here is, that I am bound to end up running into situations like these from time to time. So if an easy resolution is not found here, I am wondering whether to spend any marketing dollars on tenant occupied places. This just was dropped in my lap and I didn't spend a single dime on finding this deal, but I would hate to spend hundreds of dollars and end up in a situation like this. 

The general practice is that your offer be contingent on the property being vacant when you take ownership. It is the sellers responsibility to get rid of the tenants and if it does not happen the deal dies.

This is the only way you can make tenant occupied property deals work without you taking considerable risks.

Unless you are involved with a deal that is so good the risk of a holdover tenant is no issue you do not want to be involved in getting rid of tenants.

This deal is very thin and not worth the headaches of dealing with a bad tenant.

I would offer him max $160,000 with the tenant in place.

@Thomas S. - Thanks for the reply. But I think you missed the point, or perhaps my explanation was not clear enough. I don't want the tenant in place. Even at $160,000, which I think is a tad bit low and would result in the seller not just walking away, but stomping away from the offer, I still don't want the tenant and inherit his 6 month lease. I want the property vacant on the day I own it due to the constraints that come with HML.

The general practice is that your offer be contingent on the property being vacant when you take ownership. It is the sellers responsibility to get rid of the tenants and if it does not happen the deal dies.

At $200k, and completely empty, it's a horrible deal. All in for $230k, HML interest and fees alone would be $10-15k (depending on how much you borrow, 3-6 mo.s). Add in holding costs, sales/transfer costs, you'd be lucky not to lose money.

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