Hi All! I'm in the process of completing my FIRST ever investment property transaction, very pumped that I will soon accomplish my goal for 2017, and join you fellow investors! A little bit background of what I am dealing with: I'm closing out this 5 units property with cash out refi, and expecting to close in a month or so. At the same time, all the units currently occupied, either by TAW or leased tenants. However, for leased tenants, their lease are all up in January. In this case, what should I do in terms of lease renewal since I won't be the owner till almost December which may be too late? Also, I may move in one of those TAW unit, would a 30 days notice suffice?
Secondly, at the time that I'm taking over the units, what sort of info I need from the seller to ensure a smooth operation? And what kind of insurance are recommended/ required for it? I'm a total newbie at this so any input will be appreciated!
Since you did not screen any of the tenants, I suggest letting everybody go month to month, which should be standard with all the leases. This gives you more control over the situation. Double check all leases to make sure there isn't any automatic yearly renewal and make sure current owner knows not do sign any new leases, as they will transfer to you. Also, hopefully you have signed estoppel agreements so there is no arguments about sec deposit or rent amount.
Proper notice to move in will depend on your local laws. Many states require 30 days (full month cycle, not 30 days from notice given), but some require 60. If you have time, you can consider giving more to be nice, but try to aquaint yourself with the laws know so you don't run into issues down the line.
Congratulations on your purchase!
If you are closing on the deal, talk to the current owner. It is a common ask to have the landlord not renew any leases. If they usually do the leases now (which would make sense for Jan 1) just make sure that any renewals are TAW ot month to month leases. Ideally you tell the landlord that you do not want any of the leases renewed (assuming you want them empty) and expect all leases to end 12/31. Since this would be a risk for the current owner, they may prefer the TAW option.
TLDR:, talk to the seller and make sure that any new lease renewals would be TAWs.
As for your second question. You should certainly get building insurance for the main building and require all of your new tenants (Addendum to the lease) to get renters insurance to cover their belongings. Make sure that you also have a decent amount of liability on that insurance, talk to an agent who works in the area for the best deals (happy to recommend if needed).
For paperwork, much of the paperwork will be the same that the bank would require to close if you are financing. But you would want to get copies of all the leases, a list of any recent or major building updates/fixes, and if possible work order records for the last few months. A vendor list would also be nice to have so that things like fire-systems and snowplowing are easy to change or take over.
If you are looking for any other advice or property management, I would also be happy to discuss.
Thanks for the feedback, very helpful! I have just passed the Estoppel Agreement to the seller agent and ask the tenants to fill out. Good things are I already got the leases and met some of the tenants, but the difficult part about this transaction is that the seller himself passed away recently so it's rather difficult to locate some documents, but I think we are making progress, finger crossed!
It will be great if you can refer some insurance broker to me. To my knowledge, I just need a "landlord insurance" + "renter insurance"? Please correct me if I'm wrong. Thanks again!
@Dennis Li I can you give you my contact that I have relationship for 5+ year. PM me if you are still looking for the broker.
It's January, How's it going? We'd love to hear an update from a startup investor and realize you are likely very busy during the transition.
Stay in touch!
Rj Reynolds, REALTOR
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing