I am currently looking at a deal on the MLS that notes in the description that the purchase comes with a squatter in place. I am assuming that because of the eviction moratorium, the owner cannot evict and just wants to get rid of the property. The numbers seem to make sense, but I haven't learned how to calculate a squatter into my numbers LOL. I know I have read about doing cash for keys and that sort of strategy, but what if after I purchase it, the squatter wants nothing to do with me and just wants to stay put. How would you go about getting some sort of commitment from the squatter that they will take cash to leave if I get my hands on the place? Also, what other strategies have you used to work around this sort of issue?
First property, @Jake Drappi ? Run. Unless you've dealt with a squatter before, there's no reason to add this type of stress to your life. Covid isn't going anywhere, you'll buy this property and sit on it while someone doesn't pay you rent, won't accept cash for keys, will continue to destroy whatever is left of the property, etc. It'll break you from wanting to invest.
@Joe P. thanks for your honesty. Yes, this is my first property. I figured with the tenant issue, I would be able to get a deal but it sounds like it may be more headache than it's worth.
I would calculate 10 months of holding costs/lost rent due to the squatter. Even if the eviction moratorium gets lifted soon I expect it to be a while before evictions actually take place. Cash for keys works (I would still price in the 10 months to be safe), make sure to have the squatter sign an agreement to vacate letter. Don't pay them until they sign, completely vacate and you change the locks.
@Anthony Aiello Thanks for the response. Should I have them sign the letter before I make an offer? Also, what would happen if they sign it and then completely disregard it after I close? I am wondering if this is something that happens often?
Sure, if the seller would allow you to contact them in that way. I also would build this cost into my offer. Not many investors are buying occupied properties right now in NJ. There is no way to enforce rent collection and no way to get a non-paying tenant out.
My order of operations would be
1. sign the document to vacate
2. squatter completely vacates
3. I change the locks
4. Give squatter their payment for vacating.
@Anthony Aiello I know I should probably talk to an attorney for advice, but do you know if there is any legal action I can take if they end up not leaving per the signed paperwork to get them removed even with the moratorium in place?
@Jake Drappi You may want to ask more questions before making an offer.These questions can help you to make an informed decision:
-You should find out how the squatter got into the place. (Are they a tenant that was asked to leave for non payment and didnt' or did they break in and claim the space as their own?)
-Has the owner made any attempt to get the squatter to leave if so what has been done?
-Ask the attorney what you can do to remove the squatter, worse case scenario
An attorney will be your best guide on the final question so ask them about the rules for illegal tenancy regarding the subject property, in some instances, an illegal occupant does not have to be evicted, in some instances they can be ejected. If you can eject the tenant/squatter find out what it would take for you to do so legally and have the current owner help you to get the person(s) out.
@Vaughn Smith Thank you for the insight, I will keep that in mind for the future.