Triplex with tenants, Should I Buy or stay clear away?

Question

I'm new to Bigger Pockets and I would like to hear from an expert on this one.

I noticed two Triplex for sale and both triplex have tenants living in there. From what I gathered so far they are paying a little below the current rental market. What I'm curious about is, if I do decide to buy the Triplex that comes with tenants, do they eventually move out so that I can put in my own tenants or because of Covid, they are being protected and I would be stuck with them, even though I'm the new owner? I did do my math from what I have learn from Bigger Pockets and the ROT is about 24%, But I'm not sure if it's still a good investment or a possible nightmare. I'm wondering if the owner of these two triplex units with tenants are not paying their rent and the owner just wants out.

Should I stay clear from this if it comes with tenants?

Best Regards,

John Lin

Erickson Sainval · Answer

Best thing would be to ask property managers for your area, they should be up to date on this. Not only that do a little research of your own. You will also want to know how long those leases are in place. That will let you know how quickly you an turn around and get the proper to where you need it to be.

Joyce Tavares · Answer

Just bought a duplex with two long-term tenants at lower than market rents.  However, they have always paid rent on time and have never caused any issues.  Decided to buy duplex with them occupying it.  Increased rent upon closing and these are the best tenants I have had in a long time.  I am upgrading the units slowly, but I am pretty sure they won't leave for quite a while, and I can upgrade the duplex in the meantime without losing rents.  Just screen the existing tenants really well in the triplex.

Polo Vazquez · Answer

There is absolutely nothing wrong with buying properties with tenant in them as long as they are up to date on their rents. If rents are low, you can slowly higher them and hope they stay or higher them all at once and maybe lose them. You should pick what to do depending on the how good are the tenants or if you wan't someone to vacate a unit so you can fix it up .BTW you can't just do this as soon as you buy the property. You have to respect their current contract with the previous owner.

Michael Noto · Answer

@John Lin Has the owner provided any disclosures that outline if the tenants are current on their rent? On top of that always have your lawyers write up estoppel agreements that the tenants and seller sign.

If you don’t know what an estoppel is research here on BP or ask your lawyer. They are a very effective tool when buying properties with tenants and especially in the COVID era.

Nathan Gesner · Answer

Buying an occupied property an be a good deal...or a big nightmare. There's no way of telling what you will face. The bigger question is, how skilled are you at handling problems? I have no problem buying a property full of bad tenants because I'm experienced enough to know how to handle the situation. If you are new(er) to real estate investing, then you should proceed with caution, particularly when an eviction moratorium is in place.

I recommend you make an offer on the property but stipulate you want all the units empty prior to closing. Just tell them you intend to renovate and leave it at that. If they are willing to get the tenants out, that means all the hard work is done for you and you can start fresh.

Joseph P Finkelstein · Answer

Hi, John. I work for a brokerage in the LA area that works mostly in the multi-family space. A good portions of the deals that get done involve some tenant carryover. Depending on what your county rent controls are, there are some strategies that are effective and dealing with getting tenants out. Most of our clients use a cash for keys strategy, or do a stepped leverage of the allotted rental increase as per whatever the current rent control laws are. You can also sometimes negotiate with tenants to vacate in order to upgrade the unit and allow them to pay market rent post upgrade.

John Lin · Answer

Thank you all for sharing. I will have to look into the city law to see what protections the tenants have. I been told the tenants in California have a lot of protections. I also notice the tenants living condition is a bit of a pack rat, so I prefer to start with new tenants and my own background checks.

Triplex with tenants, Should I Buy or stay clear away?

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