Tomorrow I'll close on an REO triplex in PA in which I believe at least one of the units is occupied. The former owner is not one of the occupants. How do you recommend I make my first contact and work with them?
My plan so far is as follows:
Stop by and knock on doors in the early evening with a gift (like a gift card to a local chain of convenience stores) and a letter of introduction loaded with a couple of business cards.
If I get to talk to the occupant:
1. Ask their plans...do they want to stay or do they want to leave? If they want to leave, send them notice of termination of the lease, so eviction proceedings can begin, if necessary.
2. Ask for a copy of their current lease.
3. If they can't produce the lease, ask them how much their rent was. If it's within 10% of market, offer to sign a new 6-month lease at that rate with a provision that it will increase to market after that. If it's not within 10% of my expected rent, offer to sign a new lease at a 10% discount, like above.
4. If they can produce the lease, take it from there. Given the length of the foreclosure process, I don't expect to find anything but month-to-month in place.
5. Either way, let them know that I expect to receive their rent on 01Feb.
6. If they want to stay and we come to terms, ask them about any repairs they feel are necessary.
If I don't get to talk to the occupant, leave the gift and letter, which makes a couple of important points:
1. That they need to contact me immediately because the previous owner (the bank, actually) filed for ejectment and we might need to stop that.
2. That if I don't hear from them within 7 days, I will presume the unit is unoccupied and enter "with a locksmith".
I've reviewed these posts, BTW:
On the subject of entering, can anyone point me to the law governing that situation...specifically when it's not known whether the property is occupied or not?
I don't see the point of a gift - they could be squatters, why welcome them?
Talk to the neighbors to find out what's up if you get no answer.
Look up the types of signs that REO agents use; post a sign that property is under new management and a name and number to contact. Post a second notice that locks will be re-keyed in 3 or 5 days (pick a number) so that owner can have access, but occupants can call management to avoid that and give keys to new owner to duplicate.
You want them to contact you is the goal.
@Steve Babiak I somehow knew you'd be the first to respond ; > Thank you! Great suggestions.
Regarding the gift, I'm only talking about $10 Wawa gift cards. I think $30 worth of honey is reasonable with so much potential vinegar in the equation. just a little reciprocation psychology. I don't think they're squatters, but even if they are, I just bought a squatter a few cups of coffee. I can live with that.
@Charles McCabe I'd forgo the gift as @Steve Babiak said. There is a building here that has been empty for 4 years and involved in foreclosure. All the utilities are off, but on further investigation one of the units is occupied by a squatter, living there for who know how long without utilities. Check you building to see if utilities are on, is the water, electric and heat on, if not then in most municipalities around here nobody is allowed to live there and the building may be subject to condemnation.
A friend of mine lives in another building where there is a damaged sewer line. The contractor hired to fix it went to the municipality to get a permit for the excavation, and the town called the state health dept. who came and condemned the building and told all tenants they had to leave within 12 HOURS.
I personally had a situation where I bought a foreclosure that was occupied, that has been very rare in my experience, of the hundreds of foreclosures that I bought I can think of only a handful of times where a property was occupied. This time I went and knocked on the door, no gift in hand, introduced my self, asked for the lease and rent amount. The tenant had been living there for 4 years and didn't pay any rent because "he was fixing up the property for the owner in stead of rent." The former owner was deceased so I could not verify his story, but it didn't look like any work was done and if done didn't equate to 4 years of rent, which I figured was $48,000. I told him that the new rent was $1,000, he didn't pay and I had to evict.
Almost all the buy and hold rentals that I bought have been tenant-less, which is the way I like it. I want to pick my own tenants, screen my own tenants and set the rent to what I think it should be. In PA if there is a lease the new owner must honor that lease until its expiration.
Good luck keep us posted at BP what the outcome is, thanks.
@David Krulac Good to hear from you again. Thank you for the detailed response.
I just hung up with PECO. Units 1 and 2 have electric and gas turned on. Unit 3 has neither. That's what I expected. Near as I can tell the property is in good condition and I don't expect to find squatters (I do expect to find some folks who have gotten away without paying rent for a while because of the property situation).
It's interesting that the "gift" part raises objections. I'm not arguing, just curious . . . do you see a specific downside to it?
@Charles McCabe It could be construed as weakness. Why tip toe when they will either realize the gig is up and they start paying or they decide not to and you have to evict.
@Marc Mittman Thank you. I think my take on it would be more like, "Oh, look, this new guy isn't coming in like a d$$k the way the previous guy did. Might be worth working with him." Here's a snippet from a listing I found for one of the units (presumably the previous owner's wording):
5. MUST be able to pay $475 + 800 for security deposit. TOTAL DUE - $1,275. If you don't have this money, don't bother reaching out to me. I will not provide any workout plans. I've tried that before and it hasn't worked out.
He's right, and I would have the same expectations, but it's obviously more combative than necessary.
@Charles McCabe - how's this sound: "Let's hold out and see how much more this guy might come up with"?
Met with the first tenant (tenant, assuming she pays me on 01Feb, as agreed) and she seems awesome. She's paying a little under market, but she's keeping the place in tip-top shape, does some of the groundskeeping, and is essentially on a fixed student income, so I'm going to keep her terms as-is for now.
Meeting with the second occupant tonight (yes, I had immediate, reasonable responses from both occupants) and I expect that story to be a little less rosy . . . occupant is supposed to be a man, but I think one of this girlfriends and some number of kids are living there (the first tenant is also a wonderful source of intel). >>> It's a 400sf efficiency. <<<
The first tenant being a student would probably prefer the place to be more peaceful than what is happening with children in that other unit.
@Steve Babiak Yup, she's voiced that concern, but she's just going to have to suck it up ; > She's managing a near 4.0 GPA as it is, so it can't be that bad.
Quick update...got into the third, unoccupied unit and it's BEAUTIFUL. I'll be really surprised if it isn't rented by 01Feb.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.