Loveland, CO · Member since 2010 · 110 posts · 194 votes
8y
Id want to see their lease, I know it's not as tough as mine, an accounting of their security deposit and rent history. You'll have honor the financial terms of their lease but you should be able to change to the "behavior" parts of your lease.
Inherited tenants tend to end up getting replaced. They just don't seem to work out very often. You do not have a choice in many cases so you are much farther ahead with a tennat on M2M. In fact you will always be better off have all tenants on M2M to allow you greater control over your property. Non renewing is so much easier and less expensive than having to evict. Good tennat have no issues being on M2M where as bad tenants avoid them like the plague. Another plus.
If a seller has presently placed a new tennat on a term lease I would be very highly suspect of the quality of that tennat.
Normally I anticipate having to replace all inherited tenants.
Investor · Chicago, IL · Member since 2017 · 40 posts · 33 votes
6y
When I buy a tenant occupied multi unit, my RE lawyer sends each tenant and Estoppel Letter, which asks about lease terms, security deposit, etc. That way we can compare what the selling landlord is telling us to what the tenant has to say about lease terms and catch inconsistencies before closing.
I think it is beneficial to all parties ( buyer/seller/tenant). If a tenant does not respond to Estoppel letter, that tells us something as well. Perhaps tenant relations are poor or tenant is not paying rent, etc.
Attorney · Chicagoland · Member since 2019 · 103 posts · 90 votes
6y
@Jim Jaworowicz I don't see any reason to be wary of it, but I would acknowledge that it's a strong factor in my decision. Tenancy is such a state-by-state issue, but in Illinois normally we're happy when we see tenant occupation if the tenant is current. @Sarah Lewis's practice is pretty good, because having an attorney send an onboarding letter tells us about anything that might be anticipated to go wrong so we can budget that into the transaction.
Real Estate Agent · Firestone, CO · Member since 2018 · 124 posts · 115 votes
6y
I purchased a duplex with one tenant in place. Her lease was up a month after the purchase. We decided not to renew because we had not done the screening piece and there was going to be a major increase in the rent. I honestly believe it can work out, we just made the decision not to. Interestingly enough once she found out we were not renewing here she had her first late payment according to the landlord.
Attorney · Skokie, IL · Member since 2016 · 270 posts · 109 votes
6y
As seen in the comments above, the confrontation on this issue isn't always pleasant, but it is not impossible to have a successful transition.
I agree with @Justin Abdilla's approach as these situations can be emotionally driven and may become legally challenging. Consulting with a local attorney could be beneficial.
Milwaukee, WI · Member since 2018 · 31 posts · 18 votes
6y
I have inherited 1 property with a tenant in place. After a rough 30 - 60 days where I had to proving to her that I would (and did) address her concerns about the property, she was great. She eventually left to buy her own house. I can't fault her for that.
Investor · Olathe, KS · Member since 2017 · 123 posts · 99 votes
6y
@Jim Jaworowicz
I’ve bought properties with inherited tenants multiple times. My experience has always been good. Get a copy of the lease from the seller. Follow what that lease says. When it’s time to renew I switch to my lease. I also have them fill out an estoppel agreement which lays out the terms of the lease from the tensnt’s point of view and clears up any miscommunication. Usually the tenants are so concerned with a new owner kicking them out that they go above and beyond to make their payments on time and take care of the property. I’m just very upfront with the tenant while we are going through the purchasing process. I did have one that was way under market rent. I just explained to her that I needed to raise the rent slowly over time or she could leave. She decided it was fine and stayed. Now she’s up to market rent and been paying on time for over three years. The other positive is that money is coming in as soon as the purchase is complete. Rather than having down time while getting it rented.
Obviously if the tenant is in default at the time of purchase then the price should be discounted. As you are going to have the headache and cost of getting the tenant removed. Hope this info is helpful.