To the BP community, what are the strategies out there around purchasing a small multi-family property (2-10 units) that needs work but has existing tenants? Do you wait until the leases terms end before making improvements? Break the leases (if possible), do the work, then re-lease? I'm sure there are some legal considerations as well.
Any insight and experience shared is very much appreciated!
When purchasing you must honor the lease, it may vary state to state.
I would collect rent until lease is up and give the required notice or an increase or rent. Win-Win, you either get the increased rent or the ability to renovate.
You're legally bound to honor the existing lease when you buy a property. You'll need to either wait for the lease to end, or agree with the renters to end the lease early.
When introducing yourself to the renters in this situation, you can let them know that if they are looking to move, they are welcome to end the lease early at any time if they give you 30 days notice. Frame it as a favor to them and sometimes they'll take you up on it and move early if it's convenient for them.
You need to complete the leases. Start by working on common areas as these will benefit everyone and as leases expire and you show the place to new tenants, it will help you rent the units.
Don't rush to have the leases expire if the units are being rented at market value and you are cash flowing. You don't want all the units vacant at the same time. As units gradually become vacant, do the renovations and then list them for rent, presumably the rent will have increased. This will also spread out the costs of the renos.
This only applies to renos, do any repairs right away as leaving them unattended to can cause more damage in the long run.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you