Potential inherited tenants changed the locks

[Brenda Reems]

I am under contract on a 4 plex. I was not able to get into one of the units initially because the key that the property management company had was not the correct key (the tenants changed the locks). We could tell that there was a tenant inside but they would not answer the door. I did proceed with making an offer with the contingency of seeing the other 2 units that I was not able to get in to.

We had the inspection on the property on Friday. The unit in question is in complete disarray (think hoarder house). The cabinets were still in good shape but mold in the bathroom, stuff EVERYWHERE. So, much that the inspectors couldn't get a full inspection. But, my biggest concern is that the new key that was given to the property management was still not the correct key. The only reason we were able to get in was because the son was leaving. 

I am set to close on August 1st. Would you insist the tenants move out before closing? They have been there since 2022 so they are on a month to month lease. Or would it be OK if I let them go for a month or 2 until I get settled? It's my first property and I don't want to have to deal with a possible eviction on my first property. I have the money to be able to fix the place up right away however I would really prefer to do it this fall verses right away in August.

As always, Thank you for your help

[Wesley W.]

Take it from someone who has purchased several occupied class C multi's...the tenants are not going to follow your plan.  Most well-maintained & managed, and profitable properties are not put up for sale.  The inverse is the norm.  You are buying somebody else's dumpster fire.  The first clue is the owner has clearly ceded control of their property to the tenants.  Ask any of the multi self-managing landlords on here what would happen if a tenant went and changed the locks on their unit without permission.

You need to hope for the best, but be realistic and plan for the worst.  ("Everyone has a plan until they get punched in the face!" right, Mike?)  What I would expect is that as soon as you close on the property, at least this tenant will stop paying rent.  So, your plan to wait until the fall just got accelerated as your anticipated revenue now has been dramatically and unexpectedly reduced.  At the very least, these people will challenge you at every turn, giving you grief about everything.  (Think students' classroom behavior when there is a substitute.)  In their minds, this is "their" building, and you are "just trippin' about how things go on around here!"

My suggestion to you is acquaint yourself with a reputable eviction attorney in your market and make plans to engage them on the first month after closing.  After closing, I would immediately properly serve these tenants a notice of termination.  If they are locking the current owners out of their own property, they will treat you with even more disdain.  (They will sap your energy and enthusiasm for this career - don't let them do it.)  Expect them not to leave, and have your attorney file a holdover eviction on the day following the end of their lease.

Without a plan in place, many new folks will drag out the inevitable, hemorrhaging money the whole way.  They kind of get paralyzed with indecision.  They expect bad tenants to act like they themselves would, and when they don't - they don't know how to handle it.  These are not your kind of people.  They do not have integrity or respect for people or property.  (I can hear @JamesWise saying "They're savages!")  

Rip off the band aid, renovate the unit and screen your own folks that you can foster mutual respect with.  There are people out there that will appreciate you.  Get rid of the ones that don't.  And only offer MTM!  (Search on BP for my posts about why that's a good idea in this asset class.)  

I've NEVER had inherited tenants work out.  Sometimes they are gone in a month, sometimes it has taken 18 tension-filled, under-market months before we parted ways.  In every case, I wish I had acted sooner.

I am not trying to discourage or scare you.  Dumpster fires can be very profitable.  But I am reading your tea leaves based on experience.  When tenants show you who they are, listen to them.