Inheriting a tenant that is behind on rent????

Question

If you had the option, would you inherit a tenant that is $500 (1 month's rent) behind on rent or would you have the seller evict the tenant prior to closing?  Thanks in advance!!

Anthony Hurlburt · Answer

It is much better to have the seller evict prior to you taking on ownership of the property.

Roy N. · Answer

Todd:

We normally have the Vendor evict the tenant as a condition of Close.  However, we invest in multis, so it is often advantageous to proceed to Close even with a tenant or two in arrears.   In those instances we make an adjustment for the late rent, and rent for two subsequent rental periods, to the purchase price -  to account for the time and pleasure of dealing with the Vendor's problem.

Roy N. · Answer

Absolutely!   Even inheriting mediocre or (some) poor(ish) tenants can be better than an empty building/complex.

Kyle J. · Answer

My preference would be to obtain the property vacant rather than occupied by a problem tenant.  However, if the seller can't or isn't willing to get rid of the tenant, you should take that into consideration in your offer price and adjust it accordingly since it'll end up being your problem once you take over.

JD Martin · Answer

I require empty houses. If I do a walk through on day of closing and the house is not empty we're not closing. This would be different on multi-family for most people. In any case, I prefer to get my own tenants as one person's idea of an ideal tenant is likely different than mine.

Filipe Pereira · Answer

Who has the leverage in the sale? You or the seller? If you are holding all the leverage, require owner to evict. If the owner has the leverage and you push your luck, you may lose the deal. @Todd Bowen

Roy N. · Answer

But these are my favourite ones ... the ones that have become a burden to the current owner.  The key is to tell the true lost causes from the minor upheavals and moderate disasters ... and be certain about the area (on the edge of gentrification is always good).

Buy theses ones cheap (and already cash flow positive), then upgrade the building and the tenants.

Justin B. · Answer

That's a question that needs a LOT more info.  The things that come to mind off the top of my head besides why they are late:-- What's the payment history like-- Did their job status change-- Is $500/month low-income housing in the area or more median rent?-- How hard is it to find renters for the property?-- Is it a good area (Kind of a follow up to question 3)?

I'm sure there are more questions that I'd have with more time to think about it before purchasing.  Going off of just what you posted, I'd say no, but before that would turn into a yes, I'd have to know why the situation is what it is first.  I'm sure there are plenty of valid scenarios where I would do it.

Todd Bowen · Answer

Really good point JD!

JD Martin · Answer

There is but keep in mind a lot of "income" property that's being sold is really property that's turned out to be a money pit or a pain in the ass for the current owner. Not that many people sell high income, low effort properties unless they really have a specific use for those funds.

Inheriting a tenant that is behind on rent????

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