Buying MFH with existing leases I am not crazy about...ideas?

Question

Hi BP,

Have an offer in on a MFH (competitive bid situation) and I have just received the existing 3 leases (that expire anywhere from 30 to 120 days after I take possession).

I'm not crazy about how the leases are written:

1. Obviously not written by an attorney (I'm the daughter of one....I'm picky about my contracts)

2. Includes internet and Direct TV, both of which I want to discontinue (internet I am on the fence, but no way on Direct TV...I don't want that service transferred to my name nor pay for setup).

3. Lumps together water/sewer (building utilities) and individual unit utilities.  (not a deal breaker, but badly written).

4. Allows for tenants to change locks (after written consent). No way.

But it's mostly #2. I don't want to get into a new contract with Direct TV for my tenants. And I'm undecided about if I want to give them internet. But, is this basically 'the price of buying with existing tenants'?

I do want to evict all the tenants as I want to move into 1 unit and the others need some repairs/updating. So I'll have new tenants (and strong leases) within the first 5-6 months of ownership under my terms.

Thoughts?

Thanks

Bjorn Ahlblad · Answer

@Jennifer O. Those leases are expiring soon anyway.......just send the tenants notices of non renewal giving them the appropriate notice. Unnecessary evictions just create expense and headaches for the LL. All the best!

Michael Peters · Answer

You could always drop them down to the lowest package possible and ride out their leases.  Won't help you with your tenant-landlord relations, but its certainly an option.  For 4 months max it doesn't sound like a deal breaker if the numbers still work.  Rather then keep the contract in their name after close, which they could very well cancel anyway, I would ask that the owner prepay through the end of each lease at closing.  Contact the local provider to see how they have handled the transition in the past and what your options are.  With multiple offers and an inherited landlord I would try to make this as simple as possible for them.

Judy Parker · Answer

Multiple bids are going to unreasonably drive up the price. Have you analyzed this deal using a Bigger Pockets calculator?

Walk away from this deal if you can't buy it vacant.

Kenneth Garrett · Answer

@Jennifer O.

I like your assessment of the existing leases.  In my area we are required to honor the existing leases until they expire.  On MTM lease you can give 30 day notice, no questions asked. I would not pay for direct tv or internet on a 3 unit.  You can meter units individually and charge tenants.  Check with your state laws and city if applicable.

Mark H. Porter · Answer

This is par for the course for most of us, especially if they are long-term tenants who the prior owner coddled so they wouldn’t move.  I always just have to wait it out.  Make certain that as part of the deal the current owner can not renew any leases at all.

Jennifer O. · Answer

@Andre Taylor, Thank you Andre. I cannot (and would never) communicate with the tenants  that until I am the legal owner of the property but the P&S has strong language that no lease can be amended, extended, colored blue, etc.

And the first day after my hand recovers from signing on the dotted line, ya betcha that the non renewal notice will be hand delivered to the tenants.

Andre Taylor · Answer

Being that the leases are very close to expiring start sending out the non renewal letters now so they can prepare and you can word as the building needs major updates that requires the unit to be vacant. That will solve all your problems right there. Start fresh on your terms

Jennifer O. · Answer

@Dennis M, I have owned MFH and SFH rentals before but I've always demanded them to be delivered vacant with no transferrance of services. In this situation I am forced to take on the existing tenants for a short period and kindly asked what others have done in this situation.

I can do without a passing judgement, thank you.

Dennis M. · Answer

Geez lady ,Your worried about direct tv on the lease lol that’s the least of your problems as a landlord ! The leases run out soon so just chill out . Sounds like maybe this gig isn’t for you

Jennifer O. · Answer

Judy, I am covered on the financial end, thank you for your concern.

Buying MFH with existing leases I am not crazy about...ideas?

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