General Landlording & Rental Properties
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
considering purchase of condo with existing tenants
Hello BP users! I am wondering what questions to ask when purchasing a property with tenants already housed. I have an appointment to view the property but wonder when I could see the existing lease and how/when to ask about transfer of deposit (don't want to get stuck owing the deposit back when they leave). Also I don't know how long left is on the lease. Are their other questions to ask?
I'm afraid there is a lot of competition in this particular area and I can't offer the amenities, so already my rent will be at the lower end of the market. This is probably why he is wanting to sell. I will have to lowball offer just to make the numbers work.
If you get the property, then during the due diligence phase you can ask to see copies of the lease(s), verify the deposit amounts, etc. You may want to go an extra step and verify that rents are actually being received by also requesting bank statements and P&L statements from the current owner. Someone may say rent is x but you have no way of knowing that the tenant is current on their rent or actually paying that amount unless you see that amount showing up in the owner's bank statements each month. You will also want to have the tenants sign an estoppel certificate which is where the tenant verifies the terms of the lease.
Talk to your real estate agent about what is standard as far as requesting this info up front or during escrow. In my market, you would generally get the estoppels, bank statements, etc., after getting an accepted offer but before you lifting contingencies.
- Real Estate Broker
- Cody, WY
- 39,982
- Votes |
- 27,155
- Posts
Your inspection of contracts normally takes place during the inspection phase.
Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was actually $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.
Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.
Here is an example and explanation: Sample Estoppel
Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.
- Real Estate Consultant
- Cleveland
- 3,660
- Votes |
- 6,386
- Posts
Quote from @Gerald Jarreau:
Hello BP users! I am wondering what questions to ask when purchasing a property with tenants already housed. I have an appointment to view the property but wonder when I could see the existing lease and how/when to ask about transfer of deposit (don't want to get stuck owing the deposit back when they leave). Also I don't know how long left is on the lease. Are their other questions to ask?
I'm afraid there is a lot of competition in this particular area and I can't offer the amenities, so already my rent will be at the lower end of the market. This is probably why he is wanting to sell. I will have to lowball offer just to make the numbers work.
Just ask for the ledgers, keep it simple . Also speak with the tenant,
Aloha,
You definitely write it into the purchase offer that these documents, as well as the Condo Docs, be provided and that you have adequate time to review and confirm the information. Specifically also require "all security deposits or pre-paid rent" be transferred at closing.
Since you are (potentially) buying a Condo, be sure you also understand the Condo Docs, including monthly financial reports AND Annual Operating Budget and Reserve Funding Plan. The Reserve Funding Plan is critical to understand the likelihood of future Special Assessment or significant monthly fee increases that will destroy your cash flow.
If you are not familiar, check for a local chapter of the Community Association Institute. They will have all the resources you need to understand the documents and how the Board should be handling the Association.