am i buying a headache?

Question

house is a very good deal, but has 7 tenants living in a 2 bedrm , NO LEASE.
owner says they pay late, but always do pay ,for past 5 years . 
all in cash,as he requested, so no reciepts. 
if what he says is true that's fine, but if its not and if i have to evict ,
may take along time.  any been in this situation?
any thoughts/suggestion very appreciated.

Account Closed · Answer

I would be a little wary. No receipts means no rent history. I am not sure how things would look in a court if it comes to eviction with no lease and no tenancy proof. Also 7 people in a two bedroom sounds like an awful amount of wear and tear. Also many cities have limits on how many unrelated people can be in an apartment or house. If a neighbor complains could be trouble. It could still be worth it for exceptional returns but I would be cautious.

Carlos Garza · Answer

Look at the residence.  If they have been there for 5 years and the residence is clean and not damaged, why would anything change because of new ownership.  Everyone is so negative about everything, but why would you evict someone that pays every month and is no issue.  Ask why the rent is paid late every month.  You might come to the realization that their paycheck is received on a different day or they receive some sort of payment (child support, alimony) on the 5th or something other than the 1st.

I would also explain to the tenants that you will be requiring a lease.  It can be a month to month or any other time frame, but that will give you the ability to act if you need to.

Other than that, money talks.  If everything is good, the numbers make sense and the tenants pay, then go for it.

James H. · Answer

I would price in the cost of paying someone to handle the eviction process for me and also repairs of a trashed unit into my analysis. With 7 people in a 2br, it will be virtually trashed upon moveout whether they are being vindictive or not.

If the numbers work with those contingencies, then I might consider buying it and dealing with the tenantsf, evicting the tenants myself or paying someone else to do the dirty work since that would be in the budget.

Sam W. · Answer

It is a headache but the #s might make it worth it...besides, while it is true that when you buy the property you also buy the tenants (at least for a little while), if the property is a great deal it might be worth the hassle and aggrevation of dealing with or even evicting the tenants.  In other words, does it offer superior enough returns to make the risk and work worth it?

Marci Stein · Answer

Yes I can go see the place -supposedly they are very nice people, just poor. House is well kept. Rent is paid , in part, by the state (1/3) ,and they pay the rest  when they can-usually 2 -3 weeks late. I think i will buy the place if it is delivered vacant, otherwise I have to chase a check each month. 
thank you evryone for your very helpful thoughts!

Bryan H. · Answer

As part of the deal you can ask the owner to not renew the M2M lease, the tenants leave and the owner makes any repairs you want made prior to purchase.

Albert Hasson · Answer

Unlikely drug dealers if they have been there 5 years.  Are you buying the house sight unseen?  Why don't you just go inspect the interior and exterior and then make an educated decision to proceed or not

Carlos Garza · Answer

That's exactly right. All people that have 7 people for a 2bed are drug dealers. Could be a multitude of reasons why. The only way to know is to look into it. Where I grew up, many guys lived 4-5 to a one bedroom. They would all work full time and send the money they made back home to their families. They all lived together because it was cheaper than each getting an apartment. They are generally good people just trying to support their family the best that they can.

Christopher Coleman · Answer

Not sure what kind of area you live in but sounds like he's renting to drug dealers or something. Lots of people in one unit, CASH "but late", and no lease. Watch out a good thing can turn bad quickly.

Marci Stein · Answer

these are very helpful thoughts----thanks!
My final idea is to require the house be vacant before i buy it---would that work? 7 people in a 2 bedrm IS alot of wear and tear.

am i buying a headache?

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