Rental lease renewed by seller of duplex wat below market value

[Gerardo Ramirez]

Hello, I am new to bigger pockets and a new to real estate investing. I am in a little bit of a predicament as to how to proceed with a duplex. Our offer was accepted just a couple of days ago and  are in the process of getting inspection and appraisal before closing on our first investment duplex. We have recently received notice that seller renewed a rental agreement for one of the tenants. (Other side is vacant) from April 1, 2022 until March 31st 2023 for the amount of $1100 a month. Market value on these duplex is $1800 per side. We are uncertain as to how to continue as this wil affect our returns greatly. Is there anything that could be done? Any advice as to how to proceed? Can we ask seller for credit towards closing due to losses in income due to new lease? I thank you all in advance for any advice on this matter. 

[Greg M.]

The lease isn't going to be able to be canceled. The renter would have to agree and why would they when they're getting an $1800 unit for $1100. 

I'd hold off on spending money on the appraisal and inspection until talking to the seller. Lets assume you close end of May, you're out $700 x 10 remaining months. Send over paperwork for a $7000 seller credit. If they balk, you can walk away. Having said that, if $7000 is the difference between a good deal and a bad deal, you may need to rethink what you are doing. 

Also, make sure about rent control in your area. You don't want to find out the tenant is locked in at $1100/month + 3% increase annually.