So I'm currently looking at a duplex I want to purchase, planing to put an offer in this weekend, HOWEVER, I'm looking to owner occupy and both units are on a lease till 12/31. Both units are under market rents. My Lender told me I have 60 days to move in after closing. (FHA LOAN). I have a couple questions. First one being:
Should I tell the buyer I want him to inform the current tenants the leases will not be renewed?
Should I tell the tenants once I buy the property?
Is there something I can add to the offer that would imply the end of the lease?
My reason for ending the lease is because the rents they are paying are very low, unit1(1B1B)/$800, unit 2(2B1B)/$900, and what the average in the area for a 1B1B is $1000, and for a 2B1B it’s $1400. I’m pretty sure if I buy the place I can’t just tell the current tenants to pay me an increased rent of $500. Please let me know if there is a different way to go about this? Or if this sounds proper.
If the terms of your loan require you to owner occupy, stipulate you will require x person to vacate within 30 days after close (or more time). You cannot break the lease on the other tenant.
I would do it after the purchase and not rely on the seller. I would even give them the option to move out early without penalty. You could also give one of them the option to stay at the higher rent.
Ask your lender if underwriting will even approve you for an FHA loan where both units have leases in place until 12/31. The answer may vary based on your proposed closing date. If you close on say middle next month, then you're within the 60 day window and you'd move into the unit of the lease you non renew.
Like said above I'd deal with it after purchase versus asking the seller to get a tenant to leave early. If there were a multiple offer situation for the property, and you are asking these requests from the seller, versus another offer where the seller doesn't have to promise to get a tenant out (cash for keys, agreeing to leave etc) then your offer may go to the bottom of the pile
Purchase the property with the requirement that both units be vacant at least two weeks prior to closing. This ensures you have plenty of time to do a final walk-through, the seller can make any repairs/cleaning to be charged to the renters, and then you can choose which unit you want to occupy and then fill the other unit with someone of your choosing.
What Nathan said. I always put the onus on the seller if I want a unit vacant. What happens if you close, and they refuse to leave? Now you have to evict them. Plus, I believe honesty is best. No sense is having the tenants think you’ll let them stay if that’s not the case.
The last duplex I bought, I required one tenant to be out before closing, because he left the place a disaster. I also put in purchase agreement that no new leases will be executed. The seller asked me if he could let the other tenant know I planned on raising the rent. I said yes. Why? Because honesty. That tenant decided to leave prior to close as well. Fine by me! Two vacant units to upgrade and raise rents. It worked out wonderfully. Both units went from $1,100 rents to $1,450, with minimal upgrades of painting and carpet.