Inheriting Tenants . Yes or No ?

Question

Considering purchasing a property which will cash flow on the lower end. The tenants in the property have been there for 8 years in one unit and 4 years in the other unit. They both intend to stay. How does everyone feel about inheriting tenants?

Scott M. · Answer

It is a coin toss. Get leases, ledgers, estoppels, maintenance records and anything and everything you can get your hands on. Still, hit and miss. Have had everything look perfect and on month one they don't pay. Have had everything look bad and it works out. There is no guarantee, it is all a risk. So minimize it the best you can with due diligence but understand even then, things can go sideways.

Always be sure you are financially prepared for things to go sideways. If you need everything to go perfect, and if one thing doesn't you are going to be in trouble, then pass.

Always be sure you are financially prepared for things to go sideways.  If you need everything to go perfect, and if one thing doesn't you are going to be in trouble, then pass.

Karl B. · Answer

It's hit-and-miss as far as how good they are; some inherited tenants are good, some will drive you crazy. I buy value-add and they often have below market rents and so when their lease ends/if it has ended when I'm the new owner I put them on a month-to-month lease; I also don't raise to market right off the bat (personal choice).

The reason for M2M is if they end up not being a good tenant I can give a 30-day notice or can offer them a new lease at a monthly rent that makes me endure their nonsense with a smile on my face.

I tend to only offer a 1-year lease once I've hit market rent or if I'm filling a vacancy which of course brings is set at market rent and sometimes a bit higher.

Inheriting Tenants . Yes or No ?

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