Closing today / Tenant occupied foreclosure.. what would you do?

Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes

Hi there. Closing today on my first investment property. Bought it sight-unseen from the bank. Curious on how you would approach this situation? I will be able to knock on the door for the first time, later today!!

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Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

@Ashley Davis

Hi, Ashley. I do have a few investments of my own. Mr. Morrison is a something-something, as I've pointed out elsewhere.

When you buy a property from a bank, it isn't a foreclosure. The bank, in buying the foreclosure, has to clear the title in order to sell it, or will use the money from the sale to clear the title. This is called a REO.

Can I ask why you bought this place without looking at it? Perhaps you've taken a look at the exterior? Even if you didn't physically go there, there's still plenty to see in Google Maps and many local computerized deed registries.

I suggest you take company with you for the door knock, preferably large, male company. The tenant may have no clue what's happening. This is almost always a very traumatic experience for the tenant. It's more trying if there are shotguns and/or pitbulls involved, but fountains of tears are not the easiest thing to deal with, either. You need to figure out what sort of lease, if any, the tenant has. Most likely the easiest and least problematic legal way to get rid of the tenant will be cash for keys, but find out first what the tenant's lease says.

If it turns out that the tenant has no lease AND has no interest in leaving, you'd best start boning up about eviction law in your area. I always recommend that investors hire an experienced lawyer to do the first one for them. It's an expense, but it's also an important learning experience. Some of us go years without an eviction, some of us go days. Good luck to you, no matter what happens.

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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Rajah I see you have no investments of your own... this is quite typical in Miami as it's very competitive to get a great deal. I bought it almost $100k under comps and I did my research so I think it's safe to say that my investment will work out regardless of interiors...
9 Reply
Kyle Bruns
Saint Louis, MO · Member since 2018 · 16 posts · 18 votes
8y
Wow Ashley,
Congrats on your first purchase. Jumping in head first with no life jacket. When you knock on the door later today, I suggest you put a lot of thoughtful consideration into what you want out of this property. Do you want to keep the existing tenants and just sign a new lease. Is that even possible considering the last owner could not keep the house with the current tenants? Will you need to ask them to leave? I would take a move in/move out inspection form, and a camera. Also a list of questions to ask about their former lease, and outstanding maintenance needs would be very useful. Speaking for myself, this would be a very stressful situation, and I would find comfort in having a plan written down that I call on when I am in a complete strangers kitchen telling them they need to find different housing accommodations.
3 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
@Ashley Davis
Hi, Ashley. I do have a few investments of my own. Mr. Morrison is a something-something, as I've pointed out elsewhere.
When you buy a property from a bank, it isn't a foreclosure. The bank, in buying the foreclosure, has to clear the title in order to sell it, or will use the money from the sale to clear the title. This is called a REO.
Can I ask why you bought this place without looking at it? Perhaps you've taken a look at the exterior? Even if you didn't physically go there, there's still plenty to see in Google Maps and many local computerized deed registries.
I suggest you take company with you for the door knock, preferably large, male company. The tenant may have no clue what's happening. This is almost always a very traumatic experience for the tenant. It's more trying if there are shotguns and/or pitbulls involved, but fountains of tears are not the easiest thing to deal with, either. You need to figure out what sort of lease, if any, the tenant has. Most likely the easiest and least problematic legal way to get rid of the tenant will be cash for keys, but find out first what the tenant's lease says.
If it turns out that the tenant has no lease AND has no interest in leaving, you'd best start boning up about eviction law in your area. I always recommend that investors hire an experienced lawyer to do the first one for them. It's an expense, but it's also an important learning experience. Some of us go years without an eviction, some of us go days. Good luck to you, no matter what happens.
12 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Thank you Jim!! Very helpful. And yes, you are right, REO* Not foreclosure. Ok. Yeah I've seen the exterior and other units in the building. I am very familiar with the area. Even if it needs $50k work of work (it's 700 SqFt) I will still make a profit. The deal was too good to pass up. I was planning on knocking on the door myself to be less invasive and then calling in back up if needed. Cash for keys would be ideal. And yes starting researching eviction law as well. I realize this could take some time.. BUT hoping we do not get there.
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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Ashley Davis For a first time investment, I'd say it's very risky to buy something sight unseen. I can understand making an offer sight unseen and then following up with inspections while you're in escrow. But it's generally not a good idea to do this for future deals.
However, back in 2011-2013, my partner and I started buying condos sight unseen at trustee sales near the end of our buying phase. After about a dozen condos, our experience was that our average cost to rehab this type of condo was about $5k with a max of $15k. We bought several condos without looking first. We figured that chances were very low of encountering a burned down condo or one with extreme structural issues. I wouldn't do the same thing with a single family house because it could be burned down, have foundation issues, or other financially unfeasible repair issues. I wouldn't definitely put eyes on a SFR before buying one.
As for what to do now? Is it occupied? If so, you have to deal with the currrent occupant. If not, go in, change the locks if you have to, and get some rehab bids.
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Kyle Bruns Hi!! Thank you for the input. Love hearing what everyone has to say. Taking a move in/move out inspection form is a great idea!!
What I want to do with it, really depends on the condition and how long all of this takes. The ideal would be to hold for 2 years or so.
Yeah, I am not looking forward to knocking on the door BUT I would love to keep them, assuming they have a valid lease. A renovated 1 bed like this one just rented for $1600 a month. Maint. fees and taxes are less than $500.
QUESTION TO ALL, who is to say that they cant forge a lease?
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Hi @Andy Mirza . Thank you!! Yes, of course pretty risky however if you are saying it will cost $15k max to reno a condo.. there is no way I can lose. I bought it for $80k below the most recent comp in the building AND the area is blowing up. I will say I got it for about $100k under what I can sell it for in good condition (not lux or anything.) It seems like a no-brainer to me... what am I missing?
Yes it's tenant occupied. So if they provide me with a valid lease, I have to keep them. I don't mind that... checks right away would be great! If they don't have a lease and don't want to leave I have to file an eviction which will, of course, take time and $$$. Hoping I don't need to go that route. Cash for keys is also an option.
QUESTION TO ALL, how much should I offer with cash for keys?
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Christen G.
Rental Property Investor · Seattle, WA · Member since 2017 · 383 posts · 248 votes
8y
Hey congrats on diving in! I second @Kyle Bruns with taking a person with you to knock for the first time and bringing a camera and move in/out inspection form. You'll want to document everything from day 1. Perhaps also posting notice (+ mailing notice) that you are the new owner, your contact info and that you plan on stopping by on a specific day/time so that you can ..."meet and get on the same page going forward." That may help soften the blow/shock to them - at least they won't have to take that in front of a stranger - and could process this on their own for a day or so. Hopefully they're on a short lease, or a M2M and you can give them a reasonable time to move out and you can begin reno. Best of luck to you!
4 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Christen G. SMART! Yes, I might just do that. Leave a letter for them explaining the situation that I am the new owner rather than just dropping by unannounced. I like that. Thank you!
0 Reply
Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Ashley Davis The asset management side of our house will typically offer up to 1% of the property value as cash for keys. If the value is $200k, max CFK will be $2000.
(The condos we were rehabbing were for buy and hold and we picked these up for $15k-$50k. My rehab numbers are probably very low for what you might need.)
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Ashley sounds like you have it all figured out I suspect this works out just fine for you.. .. @Jim K. a lot of the auction . com props that are OREO your not allowed to knock on the door .. although I would anyway LOL.. just like vacant houses somehow I always find a way in before we bid..
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Thank you @Andy Mirza ! 1% is noted.
Okay let's double that $15k and say it needs $30k worth of repairs and let's add in another $5k for eviction or cash for keys.
If the property was purchased for $145k and can sell right now for $220k in good condition, thats a 40k profit (not taxed of course.)
Also can rent for $1600 and maint. fees and monthly taxes are less than $500 a month.
Am I missing something?
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Jay Hinrichs @Jim K.
I thought I had it all figured out, ha. But the responses are making me 2nd guess myself. But that's why I'm on this forum.... the more conversation and feedback, the better!
Oh wow have you really knocked on a door before closing an auction property? I thought about it but everyone said it was such a big no-no!
How many closings have you done sight unseen? Many investors in Miami do this.
Oh and this property is from Xome.com, just like auction.com.
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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
8y
@Ashley Davis Sounds like a good profit to me.
HOA's will typically try to stick you with the previous owners past due amount. Don't fall for it. You are only responsible for the HOA dues from the time you take ownership of the property and not from before. The HOA has to pursue previous owners separately and they have a mechanism to foreclose for delinquent HOA dues. (Unless Florida is different for some reason)
3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Ashley Davis:

@Jay Hinrichs @Jim K.
I thought I had it all figured out, ha. But the responses are making me 2nd guess myself. But that's why I'm on this forum.... the more conversation and feedback, the better!
Oh wow have you really knocked on a door before closing an auction property? I thought about it but everyone said it was such a big no-no!
How many closings have you done sight unseen? Many investors in Miami do this.
Oh and this property is from Xome.com, just like auction.com.
we buy 200 plus distressed homes a year .. and in the day I was buying 50 to 70 court house steps a year in Portland. and ATL>
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:

Originally posted by @Jay Hinrichs:

Ashley sounds like you have it all figured out I suspect this works out just fine for you.. .. @Jim K. a lot of the auction . com props that are OREO your not allowed to knock on the door .. although I would anyway LOL.. just like vacant houses somehow I always find a way in before we bid..
Deep down in your belly you really think this works out.
This thread is similiar to the girl who quit her job and is hell bent on wholesaling. She get a ton of pushback. This girl doesnt. There must be a reason why.
Rajah your quite amusing... this is an investor buying a property.. the other lady is trying a sales gig she never did before apples and oranges.. we buy property at auction most every week.. its the name of the game. and condo's are pretty safe from a destruction point of view.. like mentioned above … now a SFR with Harleys in front and pit bulls on the porch ya I would be a little leary of buying that one sight unseen..
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Account Closed , this is a condo, not a single family home. I would like to say I appreciate your feedback but I will never take advice from someone who hasn't done anything.
6 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Jay Hinrichs Wow that's a lot of properties!!! Very cool!!
0 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
@Andy Mirza Thank you! I keep hearing different things about the HOA. THIS IS GREAT NEWS!!!
0 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Oooo, yeah a condo not a SFH. Thank you @Account Closed !!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:

Hate to bring this up but advising Ashley to have a strong male backup is very SEXIST.
when I had my door knocking teams in Portlandia.. I had 3 teams we door knocked every NOD in the 3 counties in Oregon and Clark co in Washington.. they were two person teams man / women.. IN my case the women were much better negotiating and closing than the men the men were there for safety.. this is just reality of the day.. not sexist.. and people in major distress / IE foreclosure women are more soothing and more apt to listen .. then some slick talking dude trying to steal their equity LOL..
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
That makes sense @Jay Hinrichs !! Understood!
Any men investors in South Florida that want to come with for this fun experience :P lol
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:

Originally posted by @Ashley Davis:

That makes sense @Jay Hinrichs !! Understood!
Any men investors in South Florida that want to come with for this fun experience :P lol
You need another woman. Less chance of confrontation with two young Valley Girl type girls. The man has to be in a car or something.
this is not like the movies of delivering an escort.. two can walk to the door.. no prob... she can probably get an agent in her office to go with.. that's the smart move.. my wife has been selling real estate for almost 30 years.. she goes alone a lot but is quite cautious and very cautious at open houses.. and if she gets a bad vibe wont meet a single male at a house unless I go or someone else does.. just the world we live in.. agents can get preyed on just like anyone elses
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1 Reply
Brett Goldsmith
Investor · Los Angeles, CA · Member since 2012 · 1k+ posts · 500 votes
8y
You purchased this home as a REO? What is your goal with the property? Do you want to convert the occupant to a potential renter or will you be offering them cash for keys in hopes of avoiding an eviction?
I agree that a man or a women team would likely be ideal. Two men could be a little intimidating if only one homeowner answers the door. Many homeowners in distress could have poor attitudes and can say mean things so it's important to stay on your toes when doing this type of work. I know many men who door knock solo though and have amazing results.
1 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Ashley Davis:

Thank you Jim!! Very helpful. And yes, you are right, REO* Not foreclosure. Ok. Yeah I've seen the exterior and other units in the building. I am very familiar with the area. Even if it needs $50k work of work (it's 700 SqFt) I will still make a profit. The deal was too good to pass up. I was planning on knocking on the door myself to be less invasive and then calling in back up if needed. Cash for keys would be ideal. And yes starting researching eviction law as well. I realize this could take some time.. BUT hoping we do not get there.
Go to the bouncers of a bar/club you know, ask them to help you do a side job... Have them sit in the car as back up, probably could pay them 50 bucks ea to do this... better to have it and not need it then the opposite. Ideally you'll get one or two that work the door check IDs, they're better at "customer service"....
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