Inherited Schizophrenic Tenant

22 Replies

I'm in the process of negotiating to purchase a home that is occupied by a very elderly schizophrenic tenant who, according to the seller, has not paid rent or been on a lease in nearly ten years.  What should I do to protect myself?

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Originally posted by @Thomas Hatley:

I'm in the process of negotiating to purchase a home that is occupied by a very elderly schizophrenic tenant who, according to the seller, has not paid rent or been on a lease in nearly ten years.  What should I do to protect myself?



Reduce your purchase price by the average cost to evict a tenant in your area. Don't forget to take into account the time you will spend evicting also. Everything is a good deal, for the right price.

@Thomas Hatley either you or the seller needs to evict if they aren’t paying rent. The mental illness alone shouldn’t be much of an issue (unless it makes them violent), and assuming someone else is sort of looking after them.

If they aren’t Paying rent you need to just file and follow the eviction process. Pretty straight forward unless you live in NY or CA etc

@Thomas Hatley in that case my recommendation would be that, if the property truly is worth it even with a non-evicted schizophrenic tenant that doesn't pay rent, then go for it but you just need to be prepared to start the eviction process pretty much the day you close. As for protecting yourself, not sure there's much you can do other than file an eviction notice with the tenant, have a lawyer you can reach out to if needed, and have home insurance.

I know you said the seller can't bring herself to do it, but you'd be surprised what the potential profits from a sale can do. I'd try and lean on her first to get it done. If she absolutely won't then just proceed with caution. Good luck!

I've found that buying properties with difficult tenant situations to be a nice niche.  It makes sellers desperate and I can use that as a bargaining chip to get a better price for the property.  By solving their problem and NOT requiring it to be delivered vacant.  There are people out there who won't evict tenants for a variety of reasons.  Just like the seller you are dealing with.  And you do need to judge for your own self if an eviction is something you want to take on. 

I assume a "worst case" scenario eviction process and roll those costs plus a premium into my expense/rehab numbers.  Just the same way I'd roll the cost of repainting or whatever into my purchase offer.

One caveat with that is I invest in a fairly landlord-friendly area where evictions are straightforward, low cost and timely (relatively speaking).

I've been running about "half and half".  Half the time inherited problem tenants leave within 30 days after I post a Notice to Vacate or less than that with a Pay or Quit.  And half the time they don't and force me to evict them.  But, so far, it has all well been worth my time and annoyance for the good deals I've landed. 

@Thomas Hatley just make sure you have your attorney on speed dial for the eviction and that you have the money set aside. I recently acquired a project in Berwyn, IL where we had to clear the whole building for construction. I ended up having to evict only one of the tenants out of 16, and the process took me less than three months in a "tenant friendly" state. I know what I am doing and surround myself with professionals, so I can get evictions done in a timely manner. I often times hear from others how evictions take so long. Just make sure you are educated, follow the law, and have a great team to help you. 

Originally posted by @Kevin S.:

@Thomas Hatley you should make it part of the offer/sale that the seller evict the tenant before you close on the property. The last thing you want to deal with as a new owner is the headache of a non-paying tenant. 

 ^ This.  I do the same when looking at potential multifamily deals.  I would just inform the seller that you won't close until the problem tenants are evicted.  

Originally posted by @John Warren:

@Thomas Hatley just make sure you have your attorney on speed dial for the eviction and that you have the money set aside. I recently acquired a project in Berwyn, IL where we had to clear the whole building for construction. I ended up having to evict only one of the tenants out of 16, and the process took me less than three months in a "tenant friendly" state. I know what I am doing and surround myself with professionals, so I can get evictions done in a timely manner. I often times hear from others how evictions take so long. Just make sure you are educated, follow the law, and have a great team to help you. 

I have not had to deal with this yet as my RE investments are in a very landlord friendly state but I've heard cash for keys is the way to go in Chicago because it can be such an onerous and expensive process to get problem tenants out.  

be careful for adverse possession or  squatters rights. I'm not sure of the laws in your state but this person could claim the property as their own. Have her evicted by the seller before you do anything.

@Thomas Hatley Along with making sure your offer reflects the burden of taking on the cost for the eviction you also want to make sure the cost of the turnover of the unit is accounted for in your offer price also. The seller chose to ignore these issues for a decade by their own admission, and you are taking the problem off their hands. There is value in that, use it as leverage in your negotiations. 

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@Thomas Hatley in Texas, if someone open and notoriously lives and occupies a property, pays  no rent for 10 years, it might just be an open and shut case of adverse possession, you would need to buy the home also from the crazy "tenant" too

and that seller is either also skitzo or more likely just full of bull

 Might want to check your state laws there where the property is. Even if she gets effectively evicted, whats to stop the crazy tenant from an adverse possession claim ??

The only real way to protect yourself is not do it. It sounds like a tangled mess and there is always layers to what sounds like a rotten onion. Title report might have a even more issues

Originally posted by @John Warren:

@Thomas Hatley just make sure you have your attorney on speed dial for the eviction and that you have the money set aside. I recently acquired a project in Berwyn, IL where we had to clear the whole building for construction. I ended up having to evict only one of the tenants out of 16, and the process took me less than three months in a "tenant friendly" state. I know what I am doing and surround myself with professionals, so I can get evictions done in a timely manner. I often times hear from others how evictions take so long. Just make sure you are educated, follow the law, and have a great team to help you. 

I second this idea have a lawyer ready to go wash your hands of this quick and correctly .

I just read the statutes on adverse possession in Texas. I am not an attorney but given your circumstances, it seems to be a grey area. I would definitely discuss this with an attorney before you move forward on this deal. If you choose to move forward on this deal, I would definitely insist on vacant possession. If the seller refuses, move on. 

Originally posted by @Steven Lowe:
Originally posted by @John Warren:

@Thomas Hatley just make sure you have your attorney on speed dial for the eviction and that you have the money set aside. I recently acquired a project in Berwyn, IL where we had to clear the whole building for construction. I ended up having to evict only one of the tenants out of 16, and the process took me less than three months in a "tenant friendly" state. I know what I am doing and surround myself with professionals, so I can get evictions done in a timely manner. I often times hear from others how evictions take so long. Just make sure you are educated, follow the law, and have a great team to help you. 

I have not had to deal with this yet as my RE investments are in a very landlord friendly state but I've heard cash for keys is the way to go in Chicago because it can be such an onerous and expensive process to get problem tenants out.  

 I would strongly advise against cash for keys. Eviction is the only way to legally regain rights to your property. ESPECIALLY if you are dealing with a crazy tenant. DO NOT give them money. My advice here is plan for one years rent value plus $6000 in the offer to deal with the eviction. It should not cost anywhere near that, but if the seller wants a better offer, they can deal with it themselves. There needs to be enough compensation to cover any potential risk and to compensate for the headache of eviction.

@Thomas Hatley

Hi Thomas,

Many of these people are on government paid for medication and can be functional--perhaps she is one of them.

Maybe go knock on the door and tell her she has to leave in 2 weeks (or start paying you rent) because reason X (with sellers permission) and see what happens.

If she pays (or has been paying in cash secretly (move her to on the record payments)--you might have a good long term tenant.

(it might open up your options)

Good Luck!

I have had schizophrenic tenants.  Some are okay as tenants once they settle in, some not so much.  Change tends to be especially hard to handle/process.  

imo you definitely want a lawyer to at least review your proposed course of action.  The crux of the tenant issue is no payment & no lease - was she a guest of the seller?  Or was there ever a verbal lease agreement?  An affidavit from the seller may be in order...ianal and local laws vary. Before closing, make sure the lawyer is confident that the title is good & marketable.

For the human side, you won't cure this person or be the one human that the tenant can relate to in a linear fashion.  I suggest your goal be to avoid undo harm *while pursuing your legal rights and objectives*.  Does the seller have any contact information for the tenant's payee (if any), counselor/psych care person (if any), or relative-who-still-is-involved (many mentally ill people seem to have burned out their relatives...).  These people can be very helpful in such a situation.  Any neighbors who can offer perspective?  If the tenant has no identifiable support network, call your area's Adult Protective Services and let them know the situation - they may not talk to you until you own the property, in which case have the seller reach out first.  There may be resources that can help the tenant transition to a more stable living situation.

Originally posted by @Kevin S.:

@Thomas Hatley you should make it part of the offer/sale that the seller evict the tenant before you close on the property. The last thing you want to deal with as a new owner is the headache of a non-paying tenant. 

I really hate to say this, because I have a very soft spot in my heart for the elderly and the disabled (and that includes mental health issues); but, you don't want to make a commitment like that and then have to deal with a lengthy eviction process which can take a turn in any direction since the tenant is a reported schizophrenic. I'm inclined to agree with Kevin on this matter. I'd be sure to include that in the deal prior to closing.

Originally posted by @Joe Splitrock:
 I would strongly advise against cash for keys. Eviction is the only way to legally regain rights to your property. ESPECIALLY if you are dealing with a crazy tenant. DO NOT give them money. My advice here is plan for one years rent value plus $6000 in the offer to deal with the eviction. It should not cost anywhere near that, but if the seller wants a better offer, they can deal with it themselves. There needs to be enough compensation to cover any potential risk and to compensate for the headache of eviction.

I have done this as well when underwriting deals.  We wrote an offer recently on a 10 unit building in Chicago that had two tenants that were not paying or more than three months behind on rent so we adjusted our offer down equal to one year's rent plus $10K for each of them.  While our preference would have been for the seller to deliver the units vacant the property was being held by a BK trustee and they weren't going to evict anyone.  This way we were covered on legal fees, loss of income and potential repairs for the units.   

Updated over 2 years ago

Wanted to add...the economic vacancies caused by the slow paying/non paying tenants also affected the current income so we also took this into account when doing our underwriting.

Whether its Schizophrenia, drug addiction, depression, it doesn't matter. Id be more concerned about the refusal of payment and what the seller has done to remediate the situation, if anything. 

And only proceed if they will deliver it vacant, otherwise you could have a huge mess on your hands. It would be tough to negotiate price on something that hasn't even happened yet.