Taking ownership to evict tenants?

[Carl Lee]

Fair Warning, this isn't exactly a question about investing, but I have a situation that a family member has brought to my attention. I'm just getting started in real estate and I'm not sure how I can help them.

A relative owns a Multi-Family property and lives in it with two other tenants--a typical Chicago 3-flat. They're currently in the Pre-Foreclosure process as a result of a number of issues. They have been unable to afford the mortgage because of a business-related issue, which has been exaggerated by tenants not paying monthly rent and mounting repair bills. They do not have any rental agreements, up until this point they've operated informally--so they've had some trouble with the eviction process.

I've considered taking ownership of their property, hoping to hit the reset button and get this property moving the in the right direction again. Would this be advised? What other options are available to me to help them out?

[Peter MacKercher]

@Carl Lee I'm a bit unclear as to why you taking ownership of the property is required to help your relative here. Are you going to buy them out so they no longer have legal responsibility for the repairs and managing the tenants? Will you then be charging them rent?

The issues at the property sound compounded by their business problems and the tenants (who aren't legally tenants since there is no lease). Your relative has gotten themselves into a tough spot. You'll need to contact a local lawyer to see about the legality issues of having them removed from the property. It's either that or they sign a lease (which you've also had reviewed by an RE lawyer) so that there is a legal basis for enforcing regular rent payments, and then those recently-created tenants do, in fact, start paying rent. I highly doubt that will happen if they've been there for a substantial amount of time already; they're more likely to scoff and refuse to sign a lease. So, hopefully you have some recommendations for a local lawyer lined up already if you're not already talking to one or a few.

From a quick reading of the situation they probably shouldn't be managing/renting out a property in the first place, so if you're looking to buy them out then that'd likely be a great help to them -- this profession isn't for everyone -- as they could focus on their business issues without tenant distractions. Their other option is to start reading BiggerPockets and hope they see the light, and then start to manage the property as they should.