Eviction Before Closing?

Question

Ok Guys,

I'm in escrow on my first investment property. And I have a question. The property is a 4-plex, got it under contract for $75k. Question:

There is currently a tenant that is late on payments still living in one of the units. The Property Management company that is currently being used has said they are looking at evicting this tenant. Is this something I should ensure gets taken care of before closing? If so, how do I get that stipulated?

Thanks for the help in advance.

Account Closed · Answer

I would require that the current owner get the people out before escrow closes. I would not want to have to deal with trying to evict people I don't know and didn't sign a lease with. It can take a while and can be messy trying to get people out. I would also make sure the property is in move-in condition when escrow closes. Sometimes when people are evicted, they thrash a place. You should be able to put all of this into escrow.

Aaron Mazzrillo · Answer

If you have experience AND money, do the eviction yourself, but see if you can't use it as some leverage to get a credit or discount. If you don't have experience AND money, you should ask that the unit be delivered vacant. Maybe the seller will pay the cash for keys to get the tenant out. I just went through my most costly eviction and the tenant is finally out and my pocket is light just over $3,500. Just for the record, I purchased the property with the non-paying tenant in place just like you might.

Of course, you are in a different state so your laws may be more landlord friendly than here in California and your tenant might not be as big of a jerk as the one I had to boot.

Derek W. · Answer

I've got to go with John on this one.  Insisting on having the tenant out may even kill the deal, if not delay the closing forever.  Unfortunately evictions will be part of your life as a land lord. Get really knowledgeable and good at them early on and it will make you a better landlord forever.  But on the other hand, I've bought numerous properties with tenants that were not paying the current land lord, and after I purchase the property was able to get them paying and avoided eviction altogether.  So look at this as an exciting opportunity to learn and grow and not as a negative. Good job on getting your first four plex!

John Chapman · Answer

If you insist that eviction occur before closing then you'll just be delaying closing for some indeterminate amount of time.  There's no guarantee current management will get them out in a reasonable amount of time or that they will do in the eviction in  a way that does not make the situation worse (a lot of times tenants leave once papers are filed or you can do cash for keys)  Plus, then you'll want to inspect the unit to make sure the unit is not trashed.   I wouldn't waste my time insisting they get it done before closing, but I would factor in the cost of eviction and fixing the unit up once you get possession.  If the deal still make sense, then proceed.

Sharrod Greene · Answer

Thanks for the advice guys. I Love BiggerPockets!

Pat L. · Answer

been there done that .....

VACANT POSSESSION ....

Kelly Davis · Answer

Yes, @Robert Carl pretty successful. The property manager on-site is key or the manager assigned to the property. And of course u have to set a standard for the minimum % of vacancies allowed for the property based on the profitaability numbers.

Robert Carl · Answer

@Kelly Davis how do your company do on collections for owed rent and are yall successful.

Kelly Davis · Answer

I've been a property manager for quite a while and taken over 30 unit+buildings with majority late paying tenants. And it is very possible to make late or non-paying tenants into paying ones. If u have a sit down with them after u purchase the property and let them know that if u don't receive the first pmt on time u will immediately evict because of their track record they may get their act together.  The mgt company has allowed them to not pay. Not sure about the laws in ur state but I give notice of late pmt on the 3rd they have until the 6th to pay and on, usually before the 15, they are placed in eviction status by our attorney. You can't let an entire month pass with no payment. On tenants that r perpetual late payers or non-paying.

Jack Bobeck · Answer

Until you own it, save your money. Then use your own prop mgmt firm or foreclosure people. Control the process, get them out and then get new people in. Holidays are tough, but this is a business, not a charity.

Best of luck to you,

Jack

Eviction Before Closing?

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