Rehab with tennent in place

11 Replies

I am brand new to investing and i am still confused on the whole BRRRR strategy as far as the rehab aspect. Say I were to buy a duplex, triplex etc but there are tennents that are currently living in the units. How do i go about rehabbing those units? Obviously i don't want to kick the current tennents out while rehabbing but what other option is there? Also one more question, what are the best things to remodel to help increase value so I can refi and pull that money back out? I'm talking besides large projects such as kitchen and bathrooms. Thank you

@Sean Harris Wait for the leases to run out and don't renew. Not 100% sure what you're looking for with the second question but I'll take a stab at it. Anything that makes the place look nicer, open, and up to date. If its a weird floor plan, consult a GC or engineer on what walls can come down, floors, landscaping, exterior paint, and then little things like light fixtures, cabinet hardware, and misc. small items can make a difference. Really it's just about bringing the property up to par with other properties in the same market, you don't want to go overboard, but also don't want to under-do it.

First if you have tenants in place that pay and they are happy , collect rent , dont rehab . Do what repairs are necessary . When one moves out attack the unit and get it done . You may then find that an existing tenant may want to move in it . Then you start the process over again .   You cant rehab with someone living in the unit . 

Awesome responses that clears up a lot. What I am looking for is a place that needs minor improvements then repair whatever it needs to be up to par with current places on the market and then hopefully be able to refi and pull the money out and do it over again. The reason I am doing this is I am using a HELOC on my current home so i am wanting to pay off whatever I use on the loan as fast as possible. I am wanting multi family homes and so far i have been looking a lot in Cleveland and Memphis. I'm from CA and its way too expensive here to invest here so i am branching out.

I have the same question. If your in dire need of refinancing in 6-12 months but are relying on the rehab to refinance the property for a conventional loan it will be difficult to rehab when tenants are present.

If you have tenants who are paying you obviously don’t want to lose them but you need to rehab for ARV to refi 6-12 months after initial purchase.

How is this done?

Originally posted by @Paul Papamarkos :

I have the same question. If your in dire need of refinancing in 6-12 months but are relying on the rehab to refinance the property for a conventional loan it will be difficult to rehab when tenants are present.

If you have tenants who are paying you obviously don't want to lose them but you need to rehab for ARV to refi 6-12 months after initial purchase.

How is this done?

 if you absolutely must refinance in order to pay off rehab loans/ hard money loans/etc, but there are tenants in the units...you don't purchase that property. Cash flow management is an important part of the business. don't overleverage yourself to the point where one unforeseen makes you go bankrupt.

ideally, if you want the tenant to leave so you can rehab and refinance you either buy them out of the lease, or put them in a hotel while you refinance, but that's not something you can depend on 100%.

Owning a property at a distance that doesn't need rehab is challenging enough, trying to BRRRR at a distance is more challenging than that, and trying to BRRRR with tenants in place at a distance sounds like a complete nightmare.

Do you have teams in place in the cities you are looking to invest in? Not every property manager is equipped to handle an in depth rehab. 

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

@Michael Noto I don't have a team in place yet because I am not 100% on a market yet. I have a pretty solid list of a few places in which I am going to start interviewing the real estate agents and property managers in the next few days. I currently have a rental in the town in which i live but it was purchased back when the market was rock bottom here in CA, now its too expensive so I am looking out of state. As far as trying to BRRRR out of state have you done this before?

@Sean Harris you might need to flesh out your strategy a little more. You mentioned "What I am looking for is a place that needs minor improvements then repair whatever it needs to be up to par with current places on the market and then hopefully be able to refi and pull the money out and do it over again." When you are looking to pull your money back out, that means you are forcing 20% equity from acquisition to refinance. That is usually not done with minor rehab unless you can source the property really well.

I also do not recommend rehab with tenants in place. Let their lease expire and then rehab. I looked at doing it years ago with one of my places and I would get 2 prices: with or without residents... it was typically double the cost because of all the headache of coordinating and occupancy.

Best of luck.

Originally posted by @Sean Harris :

I am brand new to investing and i am still confused on the whole BRRRR strategy as far as the rehab aspect. Say I were to buy a duplex, triplex etc but there are tennents that are currently living in the units. How do i go about rehabbing those units? Obviously i don't want to kick the current tennents out while rehabbing but what other option is there? Also one more question, what are the best things to remodel to help increase value so I can refi and pull that money back out? I'm talking besides large projects such as kitchen and bathrooms. Thank you

 Buying an occupied property with the intent to renovate it with current occupants is not a good move. Especially while out of state. If you are looking to do a cash out refi I suggest targeting a vacant house unless you have no issues removing your tenants. Also note that the process of tenant removal can be timely if they have a current lease or don't want to play ball.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

Awesome, thank you to everyone for clearing this issue up for me.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.