Buy a house and keep existing tenants?

Question

Jerry W. · Answer

Often talking to the tenants, especially long term tenants is a great way to learn about a property.

Michael D. · Answer

For multi-family, you should expect to inherit tenants. In fact, that's generally the POINT of buying multi-family. You aren't buying land and building so much as buying a collection of leases and expenses (usually). In fact, buying troubled leases can be great if you buy them for the right price and have the stomach to deal with it properly.

For single-family it can go either way. If you plan to hold, you should want to inherit good tenants, but as others have mentioned you need to do enough due-diligence to ensure that you aren't buying a major problem. If you plan to re-sell then a tenant might make that harder.

Ali Boone · Answer

@Clay Manship hit it. It's fine to buy with tenants in, just make sure you know everything about them! I've often seen it happen where tenants get some kind of cocky (not sure if that's the right word) and think they don't have to pay when they know the management has switched over. That's the biggest risk.

Marco Santarelli · Answer

Hi @Shawn Pappas,

Welcome to BiggerPockets!

Buying an investment property with tenants in place is nice but not critical.  It depends on the state of the property (i.e. is it under rehab or on the tail end of rehab, as is the case with many of our properties).

What you want is a desirable property in a desirable neighborhood.  You and your property manager will never have a problem keeping your property leased with that criteria.  I'd rather meet that criteria with a vacant property at closing than have deadbeat tenants in an less-desirable property.

If you don't rush into anything, and do your homework, you will be able to find both.  :)

Clay Manship · Answer

Shawn-

I am under contract right now with a turnkey single family house. The tenants were leased into the home in July, and have the home through June of 2014. Going into a property with tenants can be awesome and dreadful, so do one thing very well:

DO YOUR DUE DILLIGENCE.

Make the seller provide the lease agreement, proof of funds that the tenant was screened, how they were screened, proof of funds and payment, get a tour of the house, meet with them, do EVERYTHING you can to protect your livelihood given that they WILL be your tenants through the duration of their lease.

That being said, if the tenants are good, then you are probably in a good spot. My tenants are paying slightly below market rent, and were screened by a property management company who has been collecting their rent as well. So all seems to be good in my book. Only time will tell.

Hope this helps. Good Luck!

C