How do you go about buying a property that already has tenants

Question

How do you go about buying a property that already has tenants living in it but your wanting to do renovations to the property, but your not really wanting to kick them out to do so?

Nathan Gesner · Answer

@Kortlin M Wheatfall if the current tenants are close to market rate, you leave them where they are and you don't do any renovations until they're ready to leave.

If they are below market and you want to renovate to bring it to market rate, give the tenants notice and get them out. Renovate, then rent to new tenants at the market rate.

In many of situations like this, the tenants are below market and the property has deferred maintenance. If you try bumping them to market rates, they probably can't afford it. And if you fix the property up nice, they probably won't treat it like it should be. People that live in run-down rentals for cheap are (usually) happy living like that. It doesn't make sense to put a $1,000 Tenant in a $1,500 rental because they'll treat it like a $1,000 rental.

Jonathan W. · Answer

@Kortlin M Wheatfall mainly you kick them out for renovations

Then you charge a new tenant more

If you renovate will the new tenant pay the new value? I doubt it. Plus they’ll get in the way.

Renovate when the tenant leaves but if the tenant is paying a near market or at market value why not keep them there, collect rent and use the profit for the renovations!

Scott P. · Answer

I would ask to see the current leases and ask if the tenants are current and if they have deposits and how long have they been tenants and if they have/have had any violations.

I'd wait until the tenants move to do the renovations.

If the renovations are specifically for the existing tenants, then I'd talk w/them and whoever is doing the work and then do it while trying to manage everyone's expectations sort of like remodeling a property while I was living in the property. That's something people do all the time.

Theresa Harris · Answer

Wait until they move to do the renos unless they are easy to do with the unit occupied. Most renos on rentals need the unit to be vacant. Something like replacing a countertop can be done with it occupied, but redoing a bathroom...not as easy.

Is the current rent below market value based on the current condition of the home?

How much will renos cost and how much will it increase the rent by?

How do you go about buying a property that already has tenants

4 Replies