Tenants Signed A 2 Year Contract, HELP!

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Tenants Signed A 2 Year Contract, HELP!

Kelley Phan
Member since 2018 · 25 posts · 3 votes

I just got under contract for this 5BED/2BATH w/mother in law unIt property where the numbers run great with almost $600 of net cash flow a month, which I believe to be decent for my first investment property, BUT there are a couple things I ran into and am seeking advice for. 1) During inspection, we found a few hazardous things on the property, that would need a $20k fix. B/c it is such a great deal for my area, my agent is going to try to get the asking price down from 287k to around 260 or to see if they will pay for the fix ups since they didnt disclose any of the dangerous hazards on the seller disclosure, If the seller isnt willIng, then Im out. This home has already been under contract 2x before me. MY QUESTION, why wouldn’t they disclose any of the hazards such as a former flood downstairs due to a leak, or mold in the bathrooms that they tried to hide durIng viewIng or the fact of needing a roof change and updated electrical work. Isn’t that illegal? My agent is going to try to use it as leverage. 2) the very dirty tenants downstairs has very recently signed a 2 year contract for only 1037/mo but I could easily go up to 1100-1200 which is the norm for a downstairs basement that area. CAN I UPDATE THE CONTRACT? CAN I KICK THEM OUT TO FIX THE HOME?

Please help! Thank you!

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  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    7y

    You'll have to honor the existing lease agreement, unless the tenants want to voluntarily leave or you opt to offer them cash for keys to get them to move out once you take over ownership.  But their rent doesn't sound like it's that far below market rent so I'm not sure it'd be worth it to pay them to leave.  You need to figure out what the actual market rent is first.  If it's closer to $1200 than $1100, it might be worthwhile to see if you could offer them $500 + their security deposit back (which you'll probably have to return anyway if the previous owner didn't keep good records of the move in condition, which most don't) and see if they'd be willing to move out.  If you can get new tenants in at $1200/month, it wouldn't take long to make that $500 back plus more.  You'll just have to do the math and see if it pencils out.

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  • Kelley Phan
    OP
    Member since 2018 · 25 posts · 3 votes
    7y

    @Kyle J.

    Kyle, Thank you so much. this was very helpful. I was thinking the same idea so that I can try to get better tenents in that is willing to pay more. 

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  • Aaron Stuiber
    Real Estate Consultant · Milwaukee - WI · Member since 2018 · 142 posts · 73 votes
    7y

    @Kelley Phan

    @Kyle J. Does a great job of explaining your question. Simple, and yet to the point in that getting out a tenant can be tricky but there are a few methods that work. Cash for Keys has worked well for a few deals that my brokerage has been apart of, especially with dirty tenants who don't respect the property.  It also sucks to hear that the seller was trying to hide defects which happens sometimes,  but proves that they knew about the problem at least to some degree. 

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  • Kelley Phan
    OP
    Member since 2018 · 25 posts · 3 votes
    7y

    @Aaron Stuiber

    Thank Aaron, I am going to look into creative ways for the cash for keys method. 

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