Help! Would you buy a property with uncooperative tenants?

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Help! Would you buy a property with uncooperative tenants?

Julien Anaya
Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes

I have the opportunity to purchase a property at a big discount ($220k purchase - $310k ARV). The house has uncooperative tenants, and I can't see the property. I would purchase subject to interior inspection, so I can calculate the rehab after seeing the property, but what kind of headache am I getting myself into? The idea would be to evict, flip, and sell the property. Thanks!!

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Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
5y
Originally posted by @Julien Anaya:

I have the opportunity to purchase a property at a big discount ($220k purchase - $310k ARV). The house has uncooperative tenants, and I can't see the property. I would purchase subject to interior inspection, so I can calculate the rehab after seeing the property, but what kind of headache am I getting myself into? The idea would be to evict, flip, and sell the property. Thanks!!

 The one big thing that you'll need to investigate is why they are not paying, if it is for a job loss/not paying due to the pandemic, then the restrictions for evictions are steep and you need to make sure there is a big spread for the cash for keys. If it's due to nothing that has to do with the pandemic you have more of a leg-up on evictions, and I would consult the eviction service office in Redlands on Colton Ave. They are a great resource and we have had to use them before, they'll fill you in more on the info for your situation for the current laws. 

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  • Luke Trovinger
    Realtor · Denver, CO · Member since 2020 · 259 posts · 153 votes
    5y

    Hey @Julien Anaya! I think you're definitely on the right path with the inspection contingency. I'm not sure what the current eviction moratorium status is in your part of town, but the federal moratorium has been extended through March 31st. Depending on how cooperative the tenants decide to be, you may run into an issue with an eviction process due to the moratorium and may extend your timeline and holding costs. Just something to be aware of. Good luck!

    2Reply
  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Luke Trovinger thanks for your answer. I meant to put in the post that I was going to offer cash for keys at first, an offer they can't resist, but I hope it's not a waste of money.

    1Reply
  • Luis Limon
    Rental Property Investor · Modesto, CA · Member since 2019 · 15 posts · 4 votes
    5y

    What, will normally be a go on my part if the financials look good, now with a pandemic is difficult, Is almost impossible to evict tenants during the pandemic and some states have protection even after pandemic ends, For example in California the State eviction protection states that one has to wait 3 months after the pandemic declaration ends, before performing evictions, So we are in for the long haul. Be prepared to deal with bad tenants if the pandemic ends let's say in Jul, Then you are stuck until October/November. 

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  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y

    Hey, maybe there's a reason you're getting it at a 35% discount?

    Think I'd at least do an exterior inspection of walls, windows, paving and grading.   If you can access the attic without going into a unit, that's be nice.   

    However, if it's that good a deal, you may have to roll the dice.  What are you going to do otherwise if they won't let you inside?

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  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Luis Limon I definitely don't want to wait 10 months+ to get the property. Does it make a difference that the tenants don't have an active lease and they've already been served a 60 day notice to vacate? I don't know if the sellers are even allowed to do that?

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  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Steve Morris I don't think I would buy it without the interior inspection. I wouldn't mind extending escrow as long as possible, so I'm not paying the holding costs while covid is still happening.

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  • Luis Limon
    Rental Property Investor · Modesto, CA · Member since 2019 · 15 posts · 4 votes
    5y
    Originally posted by @Julien Anaya:

    @Luis Limon I definitely don't want to wait 10 months+ to get the property. Does it make a difference that the tenants don't have an active lease and they've already been served a 60 day notice to vacate? I don't know if the sellers are even allowed to do that?

    Depends on each State, But with a federal eviction moratorium, 60 day notices to vacate are meaningless.  

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  • Steve Morris
    Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
    5y
    Originally posted by @Julien Anaya:

    Does it make a difference that the tenants don't have an active lease and they've already been served a 60 day notice to vacate? 

    1) It became a M-t-M lease

    2) Due to eviction moratoria you can't force them to leave

    You sure you want to get into this biz :)

    1Reply
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Julien Anaya:

    I have the opportunity to purchase a property at a big discount ($220k purchase - $310k ARV). The house has uncooperative tenants, and I can't see the property. I would purchase subject to interior inspection, so I can calculate the rehab after seeing the property, but what kind of headache am I getting myself into? The idea would be to evict, flip, and sell the property. Thanks!!

     The one big thing that you'll need to investigate is why they are not paying, if it is for a job loss/not paying due to the pandemic, then the restrictions for evictions are steep and you need to make sure there is a big spread for the cash for keys. If it's due to nothing that has to do with the pandemic you have more of a leg-up on evictions, and I would consult the eviction service office in Redlands on Colton Ave. They are a great resource and we have had to use them before, they'll fill you in more on the info for your situation for the current laws. 

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  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Steve Morris lol I'm already flipping, I've just never dealt with tenants before. I have the cash to deal with it, I'm just curious how much of a headache it's going to be and if my return is even worth it. Or if I should put my money into a different investment.

    0Reply
  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Peter Mckernan I appreciate the insight. It's always nice having someone local. I'm gathering all of that info as we speak before committing. I assume they will have to prove they lost their job or stopped paying due to the pandemic?

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  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Julien Anaya Yes correct, they will have to prove that fact, maybe easy for them there at that house, but I would confirm all that! Good luck, let us know how it goes and if you get the deal done! 

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  • Daniel Fitzroy
    Member since 2019 · 110 posts · 80 votes
    5y

    @Julien Anaya

    This is the first post I’ve seen like this and it really fascinated me because as I build my knowledge and prepair to invest I’ve wondered the same thing. From what these guys are saying I guess it seams like it may be a headache with the pandemic however I personally wouldn’t mind seeing it through and going for it opon more inspection. I think it’s a great idea to find out more about why the tenants aren’t paying. Like someone else on here said. And always treat them with respect when/if you meet them because they may have had issues with past landlord but may be ok with you. That’s just my thoughts on this so take it with a grain of salt but in my opinion “where there’s a will there’s a way” and it sounds like you want the property. So don’t be afraid to at least keep doing research on it! Please keep us updated as this is very interesting stuff, goodluck!

    1Reply
  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Daniel Fitzroy I appreciate your words. That's how I feel too. I would very much like to offer them a cash for keys situation so that they can use the money to find another place. I just have no idea what the magic number is. I'm just afraid of starting off the relationship on a bad note and them retaliating.

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  • Anthony KingPro Member
    Investor · Charlotte, NC · Member since 2020 · 236 posts · 247 votes
    5y

    @Julien Anaya submit a purchase contract contingent upon the units being vacant before closing. I personally would not take on this added frustration. Your good deal could become bad real quick with problem tenants and not being able to perform a suitable inspection.

    0Reply
  • Dennis Wayne
    Member since 2020 · 339 posts · 356 votes
    5y

    I do this fairly often and buy even with idiot tenants but I’m not in the people’s republic of California either so I’d require they have them out before closing it

    0Reply
  • Isaiah Williams
    Rental Property Investor · Columbus, OH · Member since 2018 · 97 posts · 66 votes
    5y

    @Julien Anaya

    Dealing with Tenants can often times be both a pleasure and a hassle. It depends a lot on what your life is like outside of real estate. Do you have a job? Are you married/ in a relationship? Do you have kids? Are you active socially or in your community? You said you do flipping so how active are you in that? Dealing with Tenants whom you already know are difficult shouldn't be a make it or break it deal, but it should definitely make you think about whether you want to self manage or hire a management company. Personally, I suggest hiring property manager. If you are going to self manage, DO NOT let the Tenants know that you are the owner. You can be the property manager, but as soon as Tenants hear the word "owner" they come to you with ALL of the issues, big or small.

    Good luck from Ohio! 🤗

    1Reply
  • Julien Anaya
    OP
    Flipper/Rehabber · Redlands, CA · Member since 2019 · 32 posts · 12 votes
    5y

    @Isaiah Williams good insight lol. My wife works full time, so I watch the kids during the day like 3 days a week. Besides that, I'm 100% in real estate. I'm an active Realtor, I have investors I write up offers for, I flip, etc...

    I currently only have 1 friend who I see every 4 months lol besides that it's all family and real estate.

    1Reply
  • Isaiah Williams
    Rental Property Investor · Columbus, OH · Member since 2018 · 97 posts · 66 votes
    5y

    @Julien Anaya

    Sounds very similar to my situation, only I am a car sales man lol.

    You can definitely make it work dealing with tenets and even self managing them on your own if You choose to. I suggest reading a book called landlording on auto pilot by Mike Butler and make your decision on whether or not to hire a property manager then!

    My only friends I talk to often are all on Bigger pockets!

    0Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Julien Anaya This is a County-specific question about eviction....the federal regulations are great, but we are talking about local elected judges here...when is the last time you heard of someone telling a judge what to do. I would call around to local eviction attorney's and see what their success rate has been in your market...that will give you an idea on your odds of getting them out.

    If it's a SFR you may also look to see if discontinuing utilities is an option...again, this is county or city-specific.

    I can tell you that we have been able to accomplish both in some counties...not so much in others in my state.

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  • Saleh RiaziPro Member
    Investor · San Jose · Member since 2018 · 46 posts · 65 votes
    5y

    Agree with @Brandon Sturgill, it is very county specific. I am surprise that you can't get in to inspect. From what I know, in most states all you need is a 24 hours notice, and then you should be able to open the door and walk in, regardless of if the tenant is ready or not. 

    Also, again, depending on the state and the county you don't have to deal with the Federal moratorium since the tenant is on month-to-month you should be able to serve them a non-renewal notice and evict them 30 days later.

    Lastly, I would be interested to know if anybody had any luck with "Cash for key" in the past. I heard it usually doesn't work. 

    1Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Julien Anaya:

    I have the opportunity to purchase a property at a big discount ($220k purchase - $310k ARV). The house has uncooperative tenants, and I can't see the property. I would purchase subject to interior inspection, so I can calculate the rehab after seeing the property, but what kind of headache am I getting myself into? The idea would be to evict, flip, and sell the property. Thanks!!

     Hi Julien, tenants can be a headache but at $90K equity, it's going to be worth it. I would just hire either a property manager or lawyer to help you vacate the property. Good luck! 

    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Isaiah Williams:

    @Julien Anaya

    Dealing with Tenants can often times be both a pleasure and a hassle. It depends a lot on what your life is like outside of real estate. Do you have a job? Are you married/ in a relationship? Do you have kids? Are you active socially or in your community? You said you do flipping so how active are you in that? Dealing with Tenants whom you already know are difficult shouldn't be a make it or break it deal, but it should definitely make you think about whether you want to self manage or hire a management company. Personally, I suggest hiring property manager. If you are going to self manage, DO NOT let the Tenants know that you are the owner. You can be the property manager, but as soon as Tenants hear the word "owner" they come to you with ALL of the issues, big or small.

    Good luck from Ohio! 🤗

     I know a lot of landlords in Columbus, Ohio that tell the tenants they are the owners. I agree with you though. I tell everyone I just work for the owner.

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  • Isaiah Williams
    Rental Property Investor · Columbus, OH · Member since 2018 · 97 posts · 66 votes
    5y

    @Remington Lyman

    I made the mistake of telling a few of my tenants early on that I actually owned the property they were living in, and I had to deal with a lot of 2am phone calls and end of the month begging for "exceptions" on collecting rent and waiving late fees. Since then I make sure to say the same thing that I work for the owner. It helps out a lot especially in situations where the the resident asks for something I need to thing about I can tell them I will bring it up to management instead of having to make an immediate decision.

    Then again it could definitely depend on the type of tenants that you have, area you invest in, etc.

    1Reply
  • Ned J.Pro Member
    Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
    5y

    Given the pandemic you will not be able to evict them... not gonna happen.

    Best option is cash for keys and factor that into your analysis..... assuming your estimate equity is as good as you think.... and the rehab isn't going to cost you  ton, you could easily offer 3-4k and still be way ahead...most tenant will take that kind of offer. But only pay it when the place is vacated and the locks changed.....not a second earlier

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