Hello, I am writing an offer for a property that is currently rented at market rent value. The seller wants to close urgently and in addition to negotiating the price, I would like the seller to negotiate with the current tenants to renew the lease and with slightly higher rent. I have been informed that the tenants would like to renew the lease as of now.
This gives me assurance of positive cash flow until 2024 and removes the work to find new tenants. Can the seller negotiate lease renewal for a potential buyer? My agent says no but I don’t see a reason on why it’s impossible.
Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
3y
@Karan Agarwal they can. However they can put it in a horrible lease that isn't in your favor. If the tenants want to renew then let them renew with you on your terms.
Your agent is guiding you correctly. Also asking the seller to work on price as well as reup tenants at a new rate you are over asking and going to lose leverage. Just buy it right and manage it right.
Real Estate Agent · Grand Rapids, MI · Member since 2016 · 89 posts · 51 votes
3y
@Karan Agarwal If they are current at market value, the seller may have a tough time getting them to agree to a higher rent.
I'm not super familiar with rules and regs of GA, but if the seller is going to have them agree to a higher rate, they will likely need to sign a new lease thereby increasing their rent from that point forward (which a tenant is likely not going to be ok with). There aren't many binding options for future rent increases, so you run the risk of the tenant just leaving when their current lease is up anyway.
I would recommend purchasing the property, and treating the current tenants with dignity & respect. If they have complaints about issues in the unit; address them. Mutual respect is earned over time, and in my experience tenants are more ok with rent increases if they know their landlord is going to maintain the property and respects them as individuals. If during that time you decide they are worth keeping, you can renegotiate the lease under your terms. If they don't want to renew at a higher rate or they aren't great tenants by your standards, you can fill it with a new tenant that you personally vetted with a lease you have control over at a higher rate.
Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
3y
You can do whatever you want as long as it is legal and ethical.
I think it would be fine as long as YOU are okay with the lease and the tenants. I've reviewed other people's leases and frankly they were garbage and leaved things up to interpretation. I think if you can figure out those logistics, you could be in good shape. Vacancy is expensive.