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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Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
8y
@Ashley Davis
Dealing with REOs and foreclosures isn't always a nice business. Yes, you do snoop around vacant places. Yes, you do knock on the doors of preforeclosure properties. It gets weird. I almost got shot once doing it. @Jay Hinrichs has been in the real estate business for forty years, and has probably forgotten more about this than I've ever learned...for instance, I've never bought any OREOs from auction.com or any auction site.
I have never done a closing sight-unseen. The closest I've gotten is a really ugly auction buy, which I just sold recently. I did not enter the house before I bid, but I did case the exterior thoroughly and I also had additional intelligence on the place.
It doesn't matter if the tenant forges the lease or actually has one. The onus is always going to be on you to prove that the tenant does NOT have a valid lease. That's will take time, effort, and money on your part.
Please don't take offense, but yes, while great deals like the one you're sure you've fallen into exist, everyone who's been knocking around real estate for a while has heard of sure things going wrong for all kinds of reasons. "There's no way I can lose" are perhaps the most common last words in real estate. You don't know for sure until you do know for sure.
Not all tenants are equal. Inherited tenants are very often tenants you don't want. You have no control over how they were screened, they already feel shafted because the building changed owners and they weren't part of the decision, and change is very difficult for them. Keep this in mind in your dealings with this one. Getting rent out of them isn't always a simple, pain-free economic exercise.
@Christen G. has a good idea about trying to warn them with a mailing. But you should be aware that people in this tenant's situation aren't always perfectly rational, no matter how hard you try with them. There's a lot of emotional baggage attached around the idea of hearth and home that gets in the way of quiet, logical, sane conversations.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jim K.:

@Ashley Davis
Dealing with REOs and foreclosures isn't always a nice business. Yes, you do snoop around vacant places. Yes, you do knock on the doors of preforeclosure properties. It gets weird. I almost got shot once doing it. @Jay Hinrichs has been in the real estate business for forty years, and has probably forgotten more about this than I've ever learned...for instance, I've never bought any OREOs from auction.com or any auction site.
I have never done a closing sight-unseen. The closest I've gotten is a really ugly auction buy, which I just sold recently. I did not enter the house before I bid, but I did case the exterior thoroughly and I also had additional intelligence on the place.
It doesn't matter if the tenant forges the lease or actually has one. The onus is always going to be on you to prove that the tenant does NOT have a valid lease. That's will take time, effort, and money on your part.
Please don't take offense, but yes, while great deals like the one you're sure you've fallen into exist, everyone who's been knocking around real estate for a while has heard of sure things going wrong for all kinds of reasons. "There's no way I can lose" are perhaps the most common last words in real estate. You don't know for sure until you do know for sure.
Not all tenants are equal. Inherited tenants are very often tenants you don't want. You have no control over how they were screened, they already feel shafted because the building changed owners and they weren't part of the decision, and change is very difficult for them. Keep this in mind in your dealings with this one. Getting rent out of them isn't always a simple, pain-free economic exercise.
@Christen G. has a good idea about trying to warn them with a mailing. But you should be aware that people in this tenant's situation aren't always perfectly rational, no matter how hard you try with them. There's a lot of emotional baggage attached around the idea of hearth and home that gets in the way of quiet, logical, sane conversations.
I would post a letter on the front door many times and they usually called me then we could discuss options.. sometimes the tenant does get shafted the owner is just ripping rents tenant has no idea whats going on.. this is why the law changed so that those with a valid lease could not be evicted.. I have seen it both ways..
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Sean Cole
Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
8y
I've bought tons of houses pre-foreclosure, at sheriff sale, from the mls, etc. and every single time I win a competitive bid I still have a fleeting thought go through my head - "what did I miss?"
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Baraa Yassin
Garland, TX · Member since 2017 · 57 posts · 28 votes
8y
@Ashley Davis
Gongrats on your deal...I would say you figured out the numbers so well...dont worry about the rehab...going with 50k budget is over already, If I were you I would the same as you did ... wouldnt worry about the numbers at all.
I would recommend to take an experienced investor with you when you knock on the door...try your best to get them sign a document for cash for keys along with short term lease stating the date the move out considering to include in the lease that no repairs would be done by you and they accept it in as is condition...I would definitly consult an attorney to write it up for you...try to be nice but firm with the occupant dont ever get emotional when taking to them.
Good Luck
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Karen Armstrong
Rental Property Investor · Atlanta, GA · Member since 2017 · 5 posts · 1 vote
8y
Ashley seems to know her risks and be financially comfortable with the situation. Yes its riskier but you mitigate risk where you can. And that is why there is possibility for greater returns. You are definitely safer with a condo townhome or newer property because less likely to have water issues, structural issues. Bid as if you would have to rehab everything inside and you might be pleasantly surprised and not have to do everything. Offer cash for keys but also start the eviction process at the same time so if they do not follow through you are already in the process. You will be farther along. I've done many cash for keys and it usually works. Occasionally you might get someone fighting the foreclosure and that could be a real headache. But that's less common.
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Mohammed Elzagha
Rental Property Investor · Madison, AL · Member since 2018 · 19 posts · 18 votes
8y
I’ve bought several houses sight unseen. The worst case scenario is the most likely scenario. That being said, I’ve made my biggest profits off these houses. Like you, I got them at a big discount because the risk was higher.
Cash for keys is your best bet. The tenants are probably the reason the landlord got foreclosed on, so getting rid of them is ideal. They’ll give you every excuse in the book to try to buy themselves more time. I usually start at 1k and work my way up to $5k depending on the house. Or you can ask them for their number and work your way to that range. Your max will be lawyers cost plus a couple months lost rent.
Be cautious of anything they tell you. Like I said, they’ll say anything to buy themselves time and the longer it takes you to start the eviction, the more it’ll cost you in the end.
1 Reply
Al Pat
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
8y
@Ashley Davis, Congratulations on your purchase. I have bought properties sight unseen as well as after fully inspecting it - both ways. At the end of the day, deal is done and you own the property so look forward. I would NOT recommend on knocking on the doors but rather place a letter in the mail box introducing yourself and your contact information advising where the rent should be deposited. I actually asked them for the best time to meet them, preferably over the weekend. I also have a tenant information update form that I place with the letter so I can have their current information, name of all tenants, contact information, employer, emergency contact etc. In the end it all worked out good with tenant occupied properties. One good thing about these kind of properties is that they are living there so at least it its inhabitable and may not need major work and rent is coming in. Figure out the eviction if they are non-paying.
Some people are just too cautious and never makes a deal whereas others like us jumps in and figures it all out. You will be just fine. Wish you all the best.
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Allan Szlafrok
Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes
8y
@Ashley Davis So I’ve bought sight unseen before and the interior was a nightmare as was evicting the tenants. We had to get the city to rush an eviction because the place was basically ready to catch fire at any time. That being said I wound up turning around the property aroind and making a nice profit. As long as your renovation budget accounts for the worst case scenarios you could do very well on this deal. But it’s definitely not for the faint of heart and it’s not something I really do anymore. Bit congrats to you and good luck with the deal.
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Account Closed
Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes
8y
@Ashley Davis Fact!! You go girl!! I shy away from occupied homes. I once had to put an old lady (Ms. Hubbard) out and I couldn’t do it. I loved her books growing up so I canceled the auction. Didn’t lose my deposit thank goodness.
1 Reply
Haider Alazzawi
Houston, TX · Member since 2017 · 41 posts · 39 votes
8y
Ashley,
I renovated 1BR condo before, 900sf. Trust me, they are super super easy. Yours is more on the high end. So does not matter what occupant do before leaving, you will redo the whole condo since it can afford it.
Best of luck.
1 Reply
Joel Fine
Rental Property Investor · Leander, TX · Member since 2018 · 183 posts · 264 votes
8y
Fascinating thread! I do hope you post a follow up to let us know what approach you took and how it went. I feel like I'm reading a serial novel and the chapter ended with a classic cliffhanger!
1 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
I am so amazed with this Bigger Pockets site and these forums. I can't believe I didn't join this sooner. How incredible I can get advice + wisdom from real investors from all over the country. I was excited to get on and read all your comments this AM. Haha. I will 100% be doing a letter versus my initial knock on door approach. And I will keep all of you posted!! I am making big bucks on this deal... I can feel it! ;)
1 Reply
Luckisha J.
Flipper/Rehabber · Brooklyn NY · Member since 2018 · 20 posts · 16 votes
8y
@Ashley Davis congrats. No worry’s you can alway post any proboems In the future. I too have purchase a home with out seeing in. I have factored In the big ticket items and I’ll work out the rest. I’m excited for you.
1 Reply
Al Pat
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
8y
@Ashley Davis once after doing the letter, you still can not get in touch with them then go place an empty lock box on the door know with the door tag envelope with the same letter. They will call you for sure. Use this trick as last resort so it doesn't loose it's effectiveness.
1 Reply
Khalil Gio
Rental Property Investor · Panama City, FL · Member since 2016 · 13 posts · 4 votes
8y
@Ashley Davis I'm not sure how Miami eviction laws work but here is a link to my county website where they have a PDF packet/ How to evict step by step in Bay County Florida. It may help with your research. Over all, in Bay county it could cost less that $500. Hopefully you wont need to evict but you should know your options. click on "Landlord Tenant Eviction Packet"
http://baycoclerk.com/forms/
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Judy Parker
Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
8y
@Ashley Davis You bought "sight unseen?" You are a lot braver than me! Keep us updated when you finally gain access. We want to see photos! And congratulations on your new purchase!
1 Reply
Rocio Zamora
Ft Lauderdale, FL · Member since 2010 · 11 posts · 8 votes
8y
Hi @Ashley Davis Im from the Miami area too. I just purchased a SFH about 6 months ago with an existing tenant. The way approached the situation was like you are planning to do it. I personally went by the property, introduced my self as the new owner and verbally made them a cash for keys offer. Unfortunately, in my case he was asking for way too much cash and honestly that would have not guaranteed he was moving out. I ended up hiring a legal firm to file an "Unlawful Detainer" lawsuit. The firm I used was Kelly Grant Law http://www.floridaevictionlawyers.com/ Their price was really reasonable. After a month and a half for filing the lawsuit I had possesion of the property. Good Luck!
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y
I'm going to add "Account Closed" as a new keyword alert.
With respect to the tenant, until you obtain possession the numbers and condition are irrelevant.
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
I LOVE THIS IDEA!! Thank you
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Originally posted by @Tom Gimer:

I'm going to add "Account Closed" as a new keyword alert.
With respect to the tenant, until you obtain possession the numbers and condition are irrelevant.
You missed all the fun from the guy who had no investment properties but a lot to say. Too bad! Ha.
1 Reply
Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Originally posted by @Rocio Zamora:
Hi @Ashley Davis Im from the Miami area too. I just purchased a SFH about 6 months ago with an existing tenant. The way approached the situation was like you are planning to do it. I personally went by the property, introduced my self as the new owner and verbally made them a cash for keys offer. Unfortunately, in my case he was asking for way too much cash and honestly that would have not guaranteed he was moving out. I ended up hiring a legal firm to file an "Unlawful Detainer" lawsuit. The firm I used was Kelly Grant Law http://www.floridaevictionlawyers.com/ Their price was really reasonable. After a month and a half for filing the lawsuit I had possesion of the property. Good Luck!
Thank you!! This is super helpful. Cross your fingers that I won't get to this point! But I know it's a big change it will. So thank youu!!
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Originally posted by @Judy Parker:

@Ashley Davis You bought "sight unseen?" You are a lot braver than me! Keep us updated when you finally gain access. We want to see photos! And congratulations on your new purchase!
For sure, I will post pics for you as soon as I get. Thank you Judy!!
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Originally posted by @Account Closed:

When people say you are a lot Braver then me, a lot of times its not a compliment. Say this liddle condo deal works out , fine. Your business model is still bad. The next deal you might buy 3 sight unseen condos and it goes BOOM. You lose your first deal profits and find yourself underwater to the tune of $200,000.
Hope this helps.
Hi Tom. She said congrats on your purchase. So I said thank you. And the fact that I am brave, is what got me this far at 30 years old. But thanks so much for your input. I would only buy after doing the research behind it. It's not like I closed my eyes and said "I'll buy this one." I will for sure keep you updated with the profit made though. Oh and little*** not liddle :)
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Ashley Davis
OP
Real Estate Agent · Miami · Member since 2018 · 42 posts · 39 votes
8y
Dear all. You're not going to believe this but I went to leave the note on the door today to find out that the tenant has already moved out. Picking keys up from the association later today.
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Bjorn AhlbladPro Member
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
8y
What a great turn of events! Don’t forget to get the locks changed! Thanks for keeping us UTD.
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