We have a home under contract and based on our numbers it cash flows quite well. The current tenants are pretty gross and don't take very good care of the place, but since its cash flowing well we were planning to keep them on for a few months then look to refresh in the spring and find new tenants. Some red flags for me from the seller is that they just sent us the Zelle information they received in an email, then for about 5 of those months they just put that the tenants paid in cash. We went back to them and asked for either the actual receipts or their Schedule E 2019 tax form. They sent over paper receipts not sure how much I really trust them though. The other issue is that the seller doesn't have a move in sheet, and when asked to provide a current walk through with the tenants to sign off on damage, as there was a lot, and all they sent us the pictures they had on the MLS listing prior to the tenants moving in and a letter signed only by the seller stating that these pictures were taken prior to move-in. This doesn't cover the light fixtures that need replacing or a section between the between bedrooms where the carpet is tore up because of the door not having enough clearance to open properly, walls that have been damaged etc.
Does anyone have any insight on how to handle where you don't trust what the seller is providing as far as payments or when they're being difficult in regards to documentation for the damage that was caused by the tenants? Also curious if you think those cash payments could actually be non-payments? I wasn't sure if that's common for sellers to fib on that part or now - still pretty brand new at all this.
Any help is greatly appreciated!
@Shandrea Tanglao I would have the LL and tenants sign Estoppel Certs agreeing to rent amounts and payments. I would absolutely seek help from your attorney regardless what the seller may say. If you are dealing direct w/o a realtor you will have problems getting disclosures etc. Don't go leaping into this thinking there is cash flow-verify!
Get a professional inspection. Make or amend your offer to be contingent on inspection of financials and property. If you suspect the seller is sketchy you can be sure that he/she is. If you can't complete the deal to your satisfaction walk away. Real estate can be extremely risky so don't take chances and don't trust the seller or seller's broker.
No deal is way better than a bad deal. This one is very likely to blow up in someone's face. Hope it is not yours.
your best bet is going to evict the tenants or not renew the lease. The seller might be shady but if you agree on a price, leave it there. Side note: make sure you check the inspection bc the seller might withhold information. Best of luck
I think you're trying to remove all aspects of risk to make this a comfortable deal for yourself @Shandrea Tanglao , but you have to accept that there will always be some level of risk. Pick the things you want addressed without compromise, and be ready to "let go" of the others. This is a seller's market and if you push too many of the wrong buttons, you may lose the deal.
If that's a risk you're willing to take, then prod away! :)
Thank you everyone for your replies! I really appreciate it. With the pandemic going on I know there are restrictions as far as evicting tenants, however since we'll be doing a month to month lease, do you foresee any issues asking them to vacate due to not renewing their lease? I know this is an attorney type question but figured you all probably have a lot more knowledge I could leverage for the time being.
When I buy properties with inherited tenants, I don't even get into what is/isn't tenant damage. I base my purchase price on what is the condition right NOW. On that same token, when an inherited tenant leaves, I only subtract tenant-caused damage that happened after I acquired the property. I'm not getting into "tenant: it was like that when I moved in" or "seller: the tenant caused that damage, you can take it out of the security deposit turned over at closing". No, no, no. It is what it is, when I buy it.
If the tenants and/or seller feel shady to me and there isn't really proof they paid their rent, I assume the worst...that I will have to go through an eviction(s)...and adjust my purchase price accordingly. My caveat is that my properties are in a landlord-friendly area and evictions are relatively easy and fast, if it comes to that. Or at least they were in pre-COVID times. Unfortunately, that does make it another ballgame.
The only issues we could possibly foresee is that the tenant digs their heals in and chooses to not move out at which point you will inevitably be forced to evict them. You really have to feel the tenant out to see if they are likely to do that @Shandrea Tanglao .
Even if they do, if the numbers work otherwise, it may still work out long term. However, if you are depleting all of your savings on this one property, you may want to consider a "less risky" purchase.