To keep or not to keep tenant

20 Replies

Hello everyone!

Looking for some guidance. I am in contract for my first investment property. It is a 2 Family. Per my contract I stated that the owner needed to establish a 6 month lease with the first floor tenant in addition to raising the rent and collecting a security deposit. The reason I extended this offer was because the current owner stated the tenants have never been late nor missed a rent payment in 6 years. However, yesterday I discovered that the tenant did not pay last months rent. While there it also came to light that the tenant has many family members visit for months.

What would you do in this situation?

Let me know if you need anymore relevant information.

Thanks!

You took an awesome situation, a month to month tenant, and screwed yourself by asking they be put on a 6 month lease. In the future, all inherited tenants should be left on month to month lease, or ideally ask for units delivered vacant. This avoids the issues you get when taking on tenants that were not properly screened by the old landlord.

Your only option now is to walk away or push current owner to evict or move to cash for keys. it may be to late to request the unit be delivered vacant, but if not that's what I would suggest doing. if you follow through with the purchase, keep this tenant on the shortest leash possible and start saving up for the (very likely) eviction cost.

Hi Jessica! As Andrew said, I would push the current owner to evict and/or ask for the property to be delivered vacant. It sounds likely that you will need to evict, so be prepared. Best of luck!

As others have said, yeah, if an inherited tenant will be month-to-month, definitely leave it that way so that when you own the place and find out that the tenant who was apparently so great really isn't, you are not contractually obligated to them. I mean, you can still file for eviction if there's nonpayment, but if on month-to-month, you can file for eviction *and* give them notice to vacate.... a two-prong attack on getting control (and hopefully some money) back.

So, if they haven't paid, file for eviction immediately. I assume that's July rent. Be ready to file for August too. Do not wait a single day longer than 05 August to file for August rent eviction/court. Get to know your local rental laws now or hire a pro to help you. This is assuming you own the place. If you have not closed yet, then obviously you can't file for eviction.

If the seller has not got the tenant to sign this new lease yet, tell him quickly to not do it.

@Andrew B. @Katie Stewart @Dick Stevens and @Nicole A.

Thank you for the feedback!

Closing is scheduled for Aug 31st. I reached out to my attorney who stated he may be able to amend the contract. According to him we may have a leg up because the decision was based on them being "model tenants", and that no longer applies. Hopefully I can get out of this mess. I will keep all of you posted.

If you previously determined this was a good investment purchase, don't let one tenant ruin the deal for you. Given the new information with the tenant being behind on rent, just use that as a negotiation point with the current seller - reduced purchase price, paid closing costs, money in escrow to use toward tenants eviction, etc. If you already signed P&S I'd say it's too late though.

Originally posted by @Andrew B. :

You took an awesome situation, a month to month tenant, and screwed yourself by asking they be put on a 6 month lease. In the future, all inherited tenants should be left on month to month lease, or ideally ask for units delivered vacant. This avoids the issues you get when taking on tenants that were not properly screened by the old landlord.

Your only option now is to walk away or push current owner to evict or move to cash for keys. it may be to late to request the unit be delivered vacant, but if not that's what I would suggest doing. if you follow through with the purchase, keep this tenant on the shortest leash possible and start saving up for the (very likely) eviction cost.

This ^ 

Only thing I’d add is you can’t just raise rent when you feel like it . That lease is a contract a binding court document . Changes are done at renewal . Your stuck under his lease when you buy a property . Inherited tenants are 99% of the time awful tenants . You better be firm right out of the gate and get this under control 

Originally posted by @Jessica Melendez :

@Dennis M. there are no leases in place. The agreement is that the tenant would sign a lease I provide with the current owner, to be transferred to me at closing.

Okay I understand . Is this your first rental property ?

@Jessica Melendez Wow I apologize for not reading your post better lol Yeah oddly enough month to month is actually what you really want as a landlord . If It’s a good Investmejt don’t be afraid because of an IdIot tenant residIng there Don’t let that intimidate you from buying a great deal ! Be firm and concise right out of the gate Inherited tenants suck
@Dennis M. No worries =) I did speak to the agent and she told me the tenants were planning on being out by the end of this month. So I’m hoping that’s still the case. My attorney also stated that we have room to possibly amend the contract being that my decision to keep her was solely based on her being on time with the rent. My hope/thinking was to keep the tenants for those short months while I fixed the second floor and got it rented. But I rather save myself the misery of legal fees. Thanks for your feedback.
Originally posted by @Jessica Melendez :
@Dennis M. No worries =) I did speak to the agent and she told me the tenants were planning on being out by the end of this month. So I’m hoping that’s still the case. My attorney also stated that we have room to possibly amend the contract being that my decision to keep her was solely based on her being on time with the rent. My hope/thinking was to keep the tenants for those short months while I fixed the second floor and got it rented. But I rather save myself the misery of legal fees. Thanks for your feedback.

One thing to consider if you plan to cash out refinance down the road on the equity in this property then it is a good idea to have a year lease instead of month to month . The banks see this as a safety in some way and a track record of reliable income . If you go month to month they tend to factor that in and may not like that .

Originally posted by @Jessica Melendez :
@Dennis M. No worries =) I did speak to the agent and she told me the tenants were planning on being out by the end of this month. So I’m hoping that’s still the case. My attorney also stated that we have room to possibly amend the contract being that my decision to keep her was solely based on her being on time with the rent. My hope/thinking was to keep the tenants for those short months while I fixed the second floor and got it rented. But I rather save myself the misery of legal fees. Thanks for your feedback.

 you should push closing until that unit is vacant. if you take over and have to evict, it could cost you a significant amount depending on your state

I do not believe in the attitude of many that inherited tenants are always headaches. That makes no sense. However, inheriting a longer term lease is terrible. I would hope any properties I buy are month-to-month leases. Then I can screen accordingly and either have them sign longer term or terminate their residency. If you already know they are trouble or behind on rents I would always make vacancy a part of my purchase. You never have to deal with a bad tenant on purchase if the seller can get rid of them first. 

Originally posted by @Anthony Wick :

I do not believe in the attitude of many that inherited tenants are always headaches. That makes no sense. However, inheriting a longer term lease is terrible. I would hope any properties I buy are month-to-month leases. Then I can screen accordingly and either have them sign longer term or terminate their residency. If you already know they are trouble or behind on rents I would always make vacancy a part of my purchase. You never have to deal with a bad tenant on purchase if the seller can get rid of them first. 

 rational people do not think every inherited tenant is bad. but rational people know that inherited tenants remove a degree of control and thereby increase risk. you are safer in assuming they are bad tenants, than in assuming they are good tenants. I always say, plan for the worst, but hope for the best.

@Andrew Boettcher

I agree with you. It's why asking for financial statements, leases, and estoppel agreements are a good idea. However, somebody above said; "Inherited tenants are 99% of the time awful tenants". Perhaps he was just being a bit hyperbolic and doesn't actually believe such a crazy number. I'd like to think so.

Good advice here. Congrats on your first investment property. It sounds like you are already getting a lot of quality education and asking the right questions.