Got 120,000 duplex under contract but I just got news today that tenant won’t move out, my options are lowering the price or pushing closeing til tenants are out. the numbers are amazing on this property we are talking 38% cash on cash rents are 700 for the 3 bedroom and 500 for the 1 bedroom I know I can get the 3 bed to 1,000 and the 1 bed to 700 or 750, which mean I could turn around and sell the house for 170,000 but I plan to keep for the long term, also my mortgage would be 400 something, but I’am worried about the eviction moratorium should I talked them down and deal with the eviction or get out the deal? Because also I don’t know if they will do damage to the property but if I do get it the 1 bedroom would pay my mortgage off every month the seller claims that the eviction moratorium doesn’t stand up in court please send replies
The federal court ruled the eviction moratorium to be unconstitutional, I would look more into your specific area to see if you can proceed with this process. For sticky tenants, the easiest thing to do is cash for keys, it's really as simple as putting a dollar amount out and see if they take it and go.
Is it safe to assume the tenant is currently not paying rent? Do you know how far behind they are, whether he/she has income or the motivation behind refusing to leave?
I have bought several properties over the years where the tenant came with the purchase. To this day I still have all of them still as tenants and all still paying rent despite several rent increases.
My point is this- sometimes buying a property with a tenant has both pros and cons. You need to weigh out both to determine if this battle is worth fighting or whether to be grateful that you are buying a cash flowing property without you having to lift a finger.
Pros:
- no upfront renovation
- no listing of property
- no background checks, property showings, or vetting tenants
- property beings making you money on the day of cosing
Cons:
- unable to vet your tenant
- could potentially be renting to criminal or sex offender etc
- unable to run background or credit checks
- difficult to brrr with active tenant if looking to refinance
- harder to create the culture for how you want your property to operate since this tenant lived here through prior regime.
Just a few things to think about. If you are able to get a seller price reduction as a result of this issue, this might work out better for you. Take the cash, keep the tenant and if it doesn't work out you will be able to evict them later if needed. Just be sure you have a good legally binding lease signed.
If the tenant is not currently paying rent and has been milking the covid programs for the past year, I would absolutely insist they are gone before you acquire. That is not a burden you want, especially on your first deal.
First-- when is there lease up? If it's a month or, two I'd just issue the non-renewal and wait it out, especially if they are paying. If you don't renew, it's easy to evict someone for possession of the property.
If it's longer than that-- definitely cash for keys. The prior owner was an idiot-- you really think someone is going to move and be homeless for $500? Start with an open conversation, "This isn't working-- how much do you need to move? " Their number might be $1,000, and that'd save you $$$.. or they might say $10,000-- and you go straight to your lawyer and do it the formal way. This way you know if they are reasonable, or it will have to go through the courts.
I have one lady now we're evicting for possession and she's staying there past her lease, I know she's not reasonable (downright crazy TBH)-- Cash for keys wasn't an option, she's got mental issues and honestly I'm happy to have it file it on her record to warn future landlords! That being said, 90% of the time, cash for keys works!
If I have someone I want out, or feel like NEEDS to go ASAP, I calculate how much it will cost me in a lawyer/lost rent/stress.. a lot of times it's just better overall to pay them to leave. My mentor said it's standard 1.5-3x rent, as they'll have to pay security deposit and first month at the next house. If you do the cash, have it contingent on them cleaning the place and you do a walk through before giving them the cash/getting the keys.
SoCal is extremely tenant friendly. I found folks wouldnt even consider purchasing a property unless it was delivered VACANT. No on wants to deal with a tenant esp during Covid. Additionally we are now seeing stories where a owner sells their property, it closes escrow, they get their funds and still refuse to vacate..how bout that..mind boggling.