This duplex popped up in the perfect neighborhood of Bay Area, the first of its kind in over 10 years to be listed. There were bad photos and incorrect listing information, so I was able to see it first and make an offer before anyone else! Here's the catch...
My offer is 100k below asking price with contingency that one of the units be vacant so I can move in - she said NO due to contingency, not price. Apparently the seller is acting weird and just not wanting to deal with asking this guy to leave / evicting him. He's got a lot of guns, taxidermy, dirt bikes, etc. and scares her.
My question is - given I won't see an opportunity like this again in this area, should I proceed with buying the duplex at a fantastic price? His lease is month-to-month so I can give him 30-day notice, potentially offer cash-for-keys, or wait until courts are open to evict him (uncertain of when this will be). However it's unclear on how long this will take or what it will cost. Apparently it plays in my favor that I want to move in to the property myself rather than evict him for a new tenant?
Thank you in advance for taking the time and for any ideas!
Note: Yes, I am working with a good agent + lawyer to find out my options; I simply wanted to bounce the ideas around here to see if there's any new perspectives.
Interesting post, in more ways than one.
You can always request that the property be vacant before moving in, but based on my experience during this pandemic, if the tenant says no to the owner, then he can do that and there is nothing anyone can legally do about it.
Did your offer on a duplex $100K under asking price, here in the Bay Area get accepted? If so then congratulations. It is a very strong sellers market right now here in the Bay Area, especially for multifamily propeties. My guess is that you offered no contingincies, and/or very quick closing, and/or it's a probate sale and/or the offer hasn't even been accepted yet and you are simply getting opnions.
@Kyle Laffey Something to be aware of is, depending on how long this tenant has been in the property, the current owner may not have any legal grounds to remove him. So you should be aware of that as you continue your negotiations (and probably should have before you even submitted your offer so it didn't become a sticking point as it appears it may have).
The new statewide rent cap law (AB1482) that went into effect this year in California, has broad protections against "no fault" evictions. We don't have all the details, but if this tenant has been in the property over 12 months, then I don't read anything in what you wrote that would give the current owner cause to get the tenant out (and it doesn't matter if he's month-to-month).
Now, if you end up buying the property, you could potential get the tenant out as the new owner under one of the exemptions to AB1482's "Just cause" provision since you intend to occupy the property. Specifically, the exemption that reads "Intent by the owner or owner-relative to occupy the unit."
However, I suggest you do more reading on this law to make sure you understand it fully before continuing:
@Kyle Laffey something doesn’t pass the sniff test for me. Why wouldn’t the seller accept because of a tenant in their building? They’re scared? $100k under in the bay, which city?
I think you could get the tenant out but it will be a long arduous process that could take years, specifically because it’s California. That $100k you’re saving could easily get eaten up in lawyer fees, lost rent, and time. I’d move on.
im in the exact same situation but here in LA county. Currently in a never ending escrow for a duplex. My duplex is little different zoned 2 condos one 1 lot so requires 2 seperate transactions. We are in contract but going no where. Initial terms were to get one unit vacant to move but but seller soon finds out from their attorney that can't happen at this time. The sellers are trying to arrange a meeting with both tenants to set up a cash for key offer. If they move out they will each get $2500 (1 months rent) to move out. Im adding an extra $2500 to the contract if they do move out and sellers are too. So far only one tenant has agreed to meet while other tenant hasnt bother responding yet. Its a tough situation because like your case property is great value and my offer is also 100k less list price. I know SFH/condos/townhouses fall under different rent control rules than multi-family. I believe the current eviction rules really only apply to multi-family 3 units are above. Only thing stopping my case from doing an eviction process is no courts are open right now. My game plan if tenants both choose not to move out is to try to negotiate an extra 20k off the contract price since original terms was 1 unit vacant. I can realistically set aside that money for attorney fees whenever this pandemic and eviction crisis gets back to normal. My case is also month to month tenants. One key thing to ask is if all the tenants are up to date on rent. That is very important. You don't want to be stuck with a deadbeat free loading tenant which could cause alot of stress. Both my tenants are super long term over 10 years tenants who are paying below market price so I could see them not accepting the cash for keys.
Did you ask the seller if you can even go in to see the property to get inspection/appprasil done? In my case both tenants said no to letting anyone in so it becomes specially troublesome for the financing part to go smoothly if i can't even get an appraiser into your property.
Originally posted by @David Pai :
I know SFH/condos/townhouses fall under different rent control rules than multi-family. I believe the current eviction rules really only apply to multi-family 3 units are above.
It’s not just multi-family 3 units and above that AB1482 applies to. It also applies to duplexes.
The only exemption to that is if it’s an owner-occupied duplex and the owner occupies one of the units as their primary residence and did so prior to the beginning of the renter’s tenancy.
I’m assuming that’s not the case in the OP’s scenario though because, if it was, providing one unit vacant wouldn’t be an issue. The seller would just be able to move out of their unit if that were the case.
So, although we don’t have all the details, it seems likely that AB1482 is going to apply to this property now AND after the OP buys it (if he does end up buying it). Hence the reason it is so important to understand this new law for California landlords playing in this space (or soon to be).
Given the current political climate, if you close on the deal, do you have sufficient reserves to carry the property if neither tenant pays rent? How long will the eviction freeze continue? If the seller is willing to sell for $100k under market value, that would be a red flag for me. I agree with previous posters; the seller has no legal right to evict the tenants to satisfy a clause in a sales contract.
If what you are saying is all true, it would be worth it to purchase the property and then give the renter the appropriate notice to vacate so you could occupy the home.
I would not make the Seller get the renter out; they clearly don't want to deal with it or they would have already done it.
And if the renter gives you any trouble, an attorney would be well worth it since you are buying $100,000 below market.
@Kyle Laffey Welcome! I agree with @Nathan G. 100k is nothing to scoff at as long as you are good with your numbers. Check what the cash flow (or not cash flow) would be until the tenant is moved out. If all is good with you then proceed. DO NOT have seller deal with tenant at all. Let sleeping dogs lie. Getting a property for 100k under asking is not uncommon specifically the way you state how you found it. See it all the time. Good luck and keep us posted.