Tax, Legal Issues, Contracts, Self-Directed IRA

User Stats

119
Posts
19
Votes

Inherited multiple evictions on section8. Need to occupy

Posted Aug 4 2022, 09:16

Just purchased a large 5 units with multiple section 8 tenants in pending evictions that have been going on for at least the last 3 months if not longer. For the terms of my loan I need to occupy one of these units within 60 days. The expectation was that the property would be delivered vacant but the evictions are being held up by the ERAP program.

I need to renovate the entire building which means I need the tenants to leave and in addition I need to occupy one of the units. I'm being told different stories about whether I can continue the current cases as the new owner or whether I'll have to start over.

either way I need to get these guys out quickly so I can do my renovations and then move in and then start finding tenants quickly so I can handle the massive mortgage. I can handle the mortgage but that means just about all my money is going to go into the property which means my reserve account is going to be at serious risk with no profit to keep it sustained.

I think my attorney messed up on some things here but we're here now, just looking at what my options are. My understanding is evictions were for non-payment and the tenants should be on month to month only. One has been there for 4 years so that means a 90-day notice. That much I'm clear on.

Upstate New York, New York

User Stats

2,041
Posts
3,755
Votes
Scott Trench
  • President of BiggerPockets
  • Denver, CO
3,755
Votes |
2,041
Posts
Scott Trench
  • President of BiggerPockets
  • Denver, CO
Replied Aug 4 2022, 09:23

This is definitely a question where the details matter. I think that you will need your attorney to give you a very clear path forward to evicting at least one of the tenants. If they don't give that to you, straight talk, get a new attorney. Keep going through the attorneys until you get one who gives you a clear, straightforward approach. 

Frankly, I think that you lost a lot of leverage in this situation when you closed. When faced with situations like this in the future, make your buyer contract contingent on one of the units being vacant upon closing. I've done this, and the seller typically finds a way to get the tenants out of there. No excuses on this - hold up closing for months if you need to in the future. The seller can always buy them out and just pay them to leave if they want to badly enough. That may be a much more painful expense for you than the seller, in this case.

Not only do you have to get at least one of these people out, when you do, you still have two other tenants who need to be evicted! You are, sadly, going to be an expert in this are on your very first purchase, and it won't be fun. 

You don't have great options here, from what I can see. I think you need to prepare mentally for a battle, make sure that you have a war chest, and can outlast these tenants through a legal/eviction battle, or pay them to leave. 

I hope someone else has more encouraging thoughts here. 

User Stats

1,032
Posts
759
Votes
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
759
Votes |
1,032
Posts
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
Replied Aug 4 2022, 09:38

If you only have 60 days to owner occupy, you just need one unit. Find the one tenant that’ll take keys for cash, move in, start the rehab in the common areas and/or on the exterior plus the unit you’ll occupy now, get an experienced attorney to help you deal with the other four.

User Stats

119
Posts
19
Votes
Replied Aug 4 2022, 11:58
Quote from @Scott Trench:

This is definitely a question where the details matter. I think that you will need your attorney to give you a very clear path forward to evicting at least one of the tenants. If they don't give that to you, straight talk, get a new attorney. Keep going through the attorneys until you get one who gives you a clear, straightforward approach. 

Frankly, I think that you lost a lot of leverage in this situation when you closed. When faced with situations like this in the future, make your buyer contract contingent on one of the units being vacant upon closing. I've done this, and the seller typically finds a way to get the tenants out of there. No excuses on this - hold up closing for months if you need to in the future. The seller can always buy them out and just pay them to leave if they want to badly enough. That may be a much more painful expense for you than the seller, in this case.

Not only do you have to get at least one of these people out, when you do, you still have two other tenants who need to be evicted! You are, sadly, going to be an expert in this are on your very first purchase, and it won't be fun. 

You don't have great options here, from what I can see. I think you need to prepare mentally for a battle, make sure that you have a war chest, and can outlast these tenants through a legal/eviction battle, or pay them to leave. 

I hope someone else has more encouraging thoughts here. 


 Wow thank you for your assistance here. I've actually been spending some time trying to research the history on this emergency rental assistance program. I'm really curious to know who are the people who were behind this and pushing it. I want to know what kind of people came up with this and didn't spend the time to consider the risks to the homeowners.

I mean I respect and understand the need to protect people who are financially disadvantaged especially since I was one of them myself but seems a little bit lopsided to build a program designed to protect those in most need that will risk pulling down people who have overcome these things. I worked hard to get out of that situation to be able to afford this house and these kinds of programs could potentially pull me right back there.

the idea that you could own property and be forced to keep somebody in that property is insane to me. If you create a program to provide funding for renters but you don't have the money to do it then you need to pause your obstruction of an owner's ability to remove a tenant until at least your program is funded because otherwise it's basically a scam. If you're not actually going to pay the rent either then all you're doing is collaborating with a non-paying tenant in an effort to allow them to live rent free.

let me not sideline my own post and create another one specifically to discuss this erap program. That's an entire discussion by itself.

User Stats

1,032
Posts
759
Votes
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
759
Votes |
1,032
Posts
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
Replied Aug 4 2022, 13:34

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 

User Stats

18,000
Posts
28,172
Votes
Nathan G.
  • Real Estate Broker
  • Cody, WY
28,172
Votes |
18,000
Posts
Nathan G.
  • Real Estate Broker
  • Cody, WY
ModeratorReplied Aug 4 2022, 20:19
Quote from @Orlando Goodon:

Have you attempted adjusting the close date? I would try to extend the closing another 1-2 months to give the Seller time to evict and deliver at least one unit vacant.


User Stats

4,641
Posts
5,593
Votes
Bill Brandt#3 Home Owner Association (HOA) Issues & Problems Contributor
  • Investor
  • Las Vegas, NV
5,593
Votes |
4,641
Posts
Bill Brandt#3 Home Owner Association (HOA) Issues & Problems Contributor
  • Investor
  • Las Vegas, NV
Replied Aug 4 2022, 21:55

You found an owner occupant loan on a 5 unit? I thought they only existed for 4 units or less?

Otherwise all echos. Next time let current owner evict, especially if they’ve started. Currently, explain to current tennats about an eviction will effect their future rental options as opposed to taking your offer of 100% if security deposit returned plus some moving expenses cash. 

User Stats

119
Posts
19
Votes
Replied Aug 5 2022, 16:05
Quote from @Bill Brandt:

You found an owner occupant loan on a 5 unit? I thought they only existed for 4 units or less?

Otherwise all echos. Next time let current owner evict, especially if they’ve started. Currently, explain to current tennats about an eviction will effect their future rental options as opposed to taking your offer of 100% if security deposit returned plus some moving expenses cash. 


 Yeah, a cash offer would be money WELL spent! My property is in high demand. I'm sitting on a major cash maker, that NEEDS to be one, because it also has significant liabilities (old house), so not having serious cash flow is asking for financial ruin. This house demands a hefty reserve account, that you HOPE you don't need, but if you do and don't have it, things can go south fast. So I need to get these people out.

User Stats

119
Posts
19
Votes
Replied Aug 5 2022, 16:08
Quote from @Nathan G.:
Quote from @Orlando Goodon:

Have you attempted adjusting the close date? I would try to extend the closing another 1-2 months to give the Seller time to evict and deliver at least one unit vacant.



 This is my 4th day of ownership. They kinda played me. Made it seem like it would be vacant and then my attorney did not really do a good job in protecting me at all. It was basically me, the amateur and bad resources. They all took their money and ran and I'm here on the forum. lol. Not even the past owner will even reply to me about some basic questions I have about the house setup. I got a handshake and a stack of papers and a "good luck buddy". lol 

User Stats

119
Posts
19
Votes
Replied Aug 5 2022, 16:10
Quote from @Sergey A. Petrov:

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 


 Right. I feel like I have a Lamborghini right now, but it needs premium gas and there are no stations within 300 miles. Well, I'm not driving 300 miles for gas...but I DO have this Lambo here...which...IF I had the gas...would be a BLAST. For now however, it's all potential and good looks.

User Stats

1,032
Posts
759
Votes
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
759
Votes |
1,032
Posts
Sergey A. Petrov
  • Real Estate Consultant
  • Seattle, WA
Replied Aug 5 2022, 16:19
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 


 Right. I feel like I have a Lamborghini right now, but it needs premium gas and there are no stations within 300 miles. Well, I'm not driving 300 miles for gas...but I DO have this Lambo here...which...IF I had the gas...would be a BLAST. For now however, it's all potential and good looks.


 Buy a truck for your daily driver, load it with empty gas cans and stock your garage with premium gas every time you have a chance to pick some up so your Lambo is ready to go on a moment’s notice 😁. As for the property, it is definitely a hurdle to get over as soon as you can (hopefully with minimal pain) and you can then plan and execute better and to your own preferences!

User Stats

119
Posts
19
Votes
Replied Aug 6 2022, 06:32
Quote from @Sergey A. Petrov:
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 


 Right. I feel like I have a Lamborghini right now, but it needs premium gas and there are no stations within 300 miles. Well, I'm not driving 300 miles for gas...but I DO have this Lambo here...which...IF I had the gas...would be a BLAST. For now however, it's all potential and good looks.


 Buy a truck for your daily driver, load it with empty gas cans and stock your garage with premium gas every time you have a chance to pick some up so your Lambo is ready to go on a moment’s notice 😁. As for the property, it is definitely a hurdle to get over as soon as you can (hopefully with minimal pain) and you can then plan and execute better and to your own preferences!


 LOL. Well first I need quality legal counsel. My attorney really failed me and still is, but now I need to learn my lesson and avoid another case of bad representation. I really need to vet these people big time. The issue is that, you basically need to know THEIR jobs. There are things that he did not do that I did not know was to be done, but that is the REASON you hire an attorney. I guess the idea is to know as much as you can, so you are not depending on them 100%. You should try to know most things and then, their job is to fill in the gaps that you miss, or explain things you are aware of, but dont understand.

I went into this not knowing much about the legal side of things, so I really needed a top attorney.

This will be like insurance reviews or even doctor reviews. If the person is personable (like my attorney was), they will get good reviews whenever things are simple and easy and their flaws don't matter. Imagine attorney does 10 simple, single family deals. So deals go smooth and buyers happy and give good reviews. Then I come in with a very complex multi family deal and their sleeping their way through work style reveals itself. 

User Stats

18
Posts
18
Votes
Wayne Marques
  • Investor
  • Maine
18
Votes |
18
Posts
Wayne Marques
  • Investor
  • Maine
Replied Aug 6 2022, 07:24
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 


 Right. I feel like I have a Lamborghini right now, but it needs premium gas and there are no stations within 300 miles. Well, I'm not driving 300 miles for gas...but I DO have this Lambo here...which...IF I had the gas...would be a BLAST. For now however, it's all potential and good looks.


 Buy a truck for your daily driver, load it with empty gas cans and stock your garage with premium gas every time you have a chance to pick some up so your Lambo is ready to go on a moment’s notice 😁. As for the property, it is definitely a hurdle to get over as soon as you can (hopefully with minimal pain) and you can then plan and execute better and to your own preferences!


 LOL. Well first I need quality legal counsel. My attorney really failed me and still is, but now I need to learn my lesson and avoid another case of bad representation. I really need to vet these people big time. The issue is that, you basically need to know THEIR jobs. There are things that he did not do that I did not know was to be done, but that is the REASON you hire an attorney. I guess the idea is to know as much as you can, so you are not depending on them 100%. You should try to know most things and then, their job is to fill in the gaps that you miss, or explain things you are aware of, but dont understand.

I went into this not knowing much about the legal side of things, so I really needed a top attorney.

This will be like insurance reviews or even doctor reviews. If the person is personable (like my attorney was), they will get good reviews whenever things are simple and easy and their flaws don't matter. Imagine attorney does 10 simple, single family deals. So deals go smooth and buyers happy and give good reviews. Then I come in with a very complex multi family deal and their sleeping their way through work style reveals itself. 


We had a similar situation last year when we needed one of two units vacant on an FHA mortgage. We had my Realtor write into the offer / P&S which unit we needed vacant in order to close. The buyer agreed and asked for a slight extension to the closing date to meet the legal requirement for the time needed to evict the tenant, and we agreed. We were able to close on the new closing date. Going in, we would have not closed if that unit wasn't vacant as agreed to, because of the same 60 day owner occupied time frame. This was something we ensured happened, we didn't rely on an attorney to follow-up on it. We weren't even sure if it was truly vacant until our final walk through on the morning of the closing.

I think you let your emotions get in the way of making the best decision.  If it was written into the contract, you should have delayed your closing until the seller was able to convey the property as agreed to.  All you can do now, as others mentioned, is find a tenant that is willing to leave even if it means paying them.  I wouldn't worry about if it is the unit you wanted vacant or not, just get someone out and move in.  You can always move into another unit down the road.  I believe you will end up being fine.  Best of luck! 

User Stats

119
Posts
19
Votes
Replied Aug 8 2022, 20:02
Quote from @Wayne Marques:
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:
Quote from @Orlando Goodon:
Quote from @Sergey A. Petrov:

As an investor and as a landlord, you can choose whether or not you partake in those programs... You inherited / bought into it, but once you've worked the kinks out, you can decide what you do next. 


 Right. I feel like I have a Lamborghini right now, but it needs premium gas and there are no stations within 300 miles. Well, I'm not driving 300 miles for gas...but I DO have this Lambo here...which...IF I had the gas...would be a BLAST. For now however, it's all potential and good looks.


 Buy a truck for your daily driver, load it with empty gas cans and stock your garage with premium gas every time you have a chance to pick some up so your Lambo is ready to go on a moment’s notice 😁. As for the property, it is definitely a hurdle to get over as soon as you can (hopefully with minimal pain) and you can then plan and execute better and to your own preferences!


 LOL. Well first I need quality legal counsel. My attorney really failed me and still is, but now I need to learn my lesson and avoid another case of bad representation. I really need to vet these people big time. The issue is that, you basically need to know THEIR jobs. There are things that he did not do that I did not know was to be done, but that is the REASON you hire an attorney. I guess the idea is to know as much as you can, so you are not depending on them 100%. You should try to know most things and then, their job is to fill in the gaps that you miss, or explain things you are aware of, but dont understand.

I went into this not knowing much about the legal side of things, so I really needed a top attorney.

This will be like insurance reviews or even doctor reviews. If the person is personable (like my attorney was), they will get good reviews whenever things are simple and easy and their flaws don't matter. Imagine attorney does 10 simple, single family deals. So deals go smooth and buyers happy and give good reviews. Then I come in with a very complex multi family deal and their sleeping their way through work style reveals itself. 


We had a similar situation last year when we needed one of two units vacant on an FHA mortgage. We had my Realtor write into the offer / P&S which unit we needed vacant in order to close. The buyer agreed and asked for a slight extension to the closing date to meet the legal requirement for the time needed to evict the tenant, and we agreed. We were able to close on the new closing date. Going in, we would have not closed if that unit wasn't vacant as agreed to, because of the same 60 day owner occupied time frame. This was something we ensured happened, we didn't rely on an attorney to follow-up on it. We weren't even sure if it was truly vacant until our final walk through on the morning of the closing.

I think you let your emotions get in the way of making the best decision.  If it was written into the contract, you should have delayed your closing until the seller was able to convey the property as agreed to.  All you can do now, as others mentioned, is find a tenant that is willing to leave even if it means paying them.  I wouldn't worry about if it is the unit you wanted vacant or not, just get someone out and move in.  You can always move into another unit down the road.  I believe you will end up being fine.  Best of luck! 


 I was overwhelmed. This is my first time doing this and my job is demanding and I was new at job too. So I was focused on other things. Apriasal alone was a MASSIVE deal. I was daily watching the market like a hawk and gathering data on it.

User Stats

6,254
Posts
6,556
Votes
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
6,556
Votes |
6,254
Posts
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
Replied Aug 8 2022, 20:07

Sorry, dude, but you bought this place why....? Did you do zero due diligence?

User Stats

119
Posts
19
Votes
Replied Aug 15 2022, 05:04
Quote from @Bruce Woodruff:

Sorry, dude, but you bought this place why....? Did you do zero due diligence?


 What you mean zero due diligence? What exactly are you referring to that you recommend I should have done?

User Stats

6,789
Posts
3,438
Votes
Colleen F.
  • Investor
  • Narragansett, RI
3,438
Votes |
6,789
Posts
Colleen F.
  • Investor
  • Narragansett, RI
Replied Aug 15 2022, 06:46

@Orlando Goodon find a top Eviction attorney who does alot of evictions in the area. Then I would find one tenant who wants no eviction on their record and get them to go get out potentially by paying them.  I don't like cash for keys but this might be a case for it. Talk to all the section 8 caseworkers.    I just have to wonder if you didn't think too much about two years of eviction moratorium before you bought? 

User Stats

6,254
Posts
6,556
Votes
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
6,556
Votes |
6,254
Posts
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
Replied Aug 15 2022, 07:29
Quote from @Orlando Goodon:
Quote from @Bruce Woodruff:

Sorry, dude, but you bought this place why....? Did you do zero due diligence?


 What you mean zero due diligence? What exactly are you referring to that you recommend I should have done?


 The whole thing with the tenants and the ERAP program should have been more apparent I would think. But I'm not there, maybe no one would have seen that.....?

User Stats

119
Posts
19
Votes
Replied Aug 15 2022, 10:49
Quote from @Colleen F.:

@Orlando Goodon find a top Eviction attorney who does alot of evictions in the area. Then I would find one tenant who wants no eviction on their record and get them to go get out potentially by paying them.  I don't like cash for keys but this might be a case for it. Talk to all the section 8 caseworkers.    I just have to wonder if you didn't think too much about two years of eviction moratorium before you bought? 


 My understanding is the eviction protection was over, hence they finally started evictions in the house early this year. The fact there were active cases, suggested evictions were again allowed.

The due diligence missing in my view was from my team. I looked at this as an amateur. The point of these professionals is that they were to warn me about stuff like this. Nobody even pushed for clarity on the cases. It was I who got nervous and went on court site and looked it up, found the cases and informed my attorney who did not have much to say beyond "You sure you want to get the house before the tenants get out?". Also "it can take months". This was perhaps enough for legal cover. Telling me it might take months is one thing, letting me know that its possible they stay in the house forever, literally, is another. Nobody even mentioned that squatting is a big issue going on right now. I was always the one raising alarms, and they would look at me like I'm just scared or something. For example, I was the one pressing hard on knowing if tenants were paying rent. Everybody else was happy with the seller just not responding.

When it came to protecting me deposit, due diligence was done. They found issues and adjusted contract. However the biggest risk (the tenants) was taken very casually. Bottom line, I had horrible resources so ended up in a situation one does, if they try to represent themselves...

User Stats

119
Posts
19
Votes
Replied Aug 15 2022, 11:07

So I'm learning maybe some good news. Stuff I found though. None of attorneys have mentioned this.

So the protection for tenants have limits. for example it looks like maybe smaller than 6 units, does not have rent control and the eviction protections don't apply. Seems they are meant to target large buildings. Maybe sense. Imagine a duplex. One guy not paying means nobody pays.

also seems:

Selling a house is an exception, so seller could have used that to evict instead of continuing his non payment.

Owner move in also seems an exception, so I should be entitled to take one unit. Also mentioned family, so maybe I could even rent to family so I take two units.

Non-payment is not allowed beyond the 3 months of forward rent ERAP gives you. That should be another good cause.

Health and safety issues are another potential good cause. I got a guy with literal trash on deck and there are bugs and this endangers my other tenants child.

Also seems one tenant does not like my politics. Took down one of my signs. I was placed kind of close to their unit on exterior wall, but I'm entitled to post signs on my own property. The sign was in support of protected class, so I think its problematic for a tenant to take down such a sign I put up on my property on the outside.

I believe for a renter, all they get is inside. Once they step outside the door, they have no say unless its something like safety related.

I got court records today. Reviewing the causes before doing attorney session.

User Stats

6,254
Posts
6,556
Votes
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
6,556
Votes |
6,254
Posts
Bruce Woodruff#2 All Forums Contributor
  • Contractor
  • Arizona
Replied Aug 15 2022, 11:32
Quote from @Orlando Goodon:

Also seems one tenant does not like my politics. Took down one of my signs. I was placed kind of close to their unit on exterior wall, but I'm entitled to post signs on my own property. The sign was in support of protected class, so I think its problematic for a tenant to take down such a sign I put up on my property on the outside.

So you buy a place and put up divisive political signs? Doesn't seem like a good plan to me. Your tenants are paying you for a place to call their home. Think about how you'd feel if you were the tenant and the brand new landlord put up a sign saying the reverse of your sign.....