Do flippers deal with tenants?

Question

I’ve been noticing that on market properties with high ARV & large spread after repairs/rehab have been sitting on the market for long periods of time due to current tenants.

Are there any rehab investors out there well versed in purchasing properties with tenants delivered with the property? Especially in Los Angeles and Orange County.

How do you guys get current tenants out with the current memorandum?

Evan Polaski · Answer

@Dana Sample, I cannot speak to CA specifically, but flipping is a speed game, and tenants can be a pain in the rear.  I would not waste time trying to figure it out.

To answer your question, you need to incentivize the tenants to leave on their own accord, which typically means cash for keys.  But a reasonably smart tenant will likely not take that, since they will be out, but then where will they live.  I may be putting too much thought into this, but if it were me, and I had a free place to live, you would need to pay me A LOT of money to leave, since I will need to put a deposit, first and last down on a new place, and who knows if any landlord will ever lease to me once I leave, since I wasn't paying and possibly don't have a job.

Joe Homs · Answer

@Dana Sample cash for keys.

Good Investing...

Teri Feeney Styers · Answer

@Dana Sample I tell sellers that I buy property not people. I require the seller to have the house vacant when I buy it (in the contract). If we need to write a long contract so be it.

Kyle J. · Answer

This is probably correct in every state EXCEPT California.

@Dana Sample  If you're going to buy properties with tenants in them, it's going to be critical that you understand certain landlord-tenant laws, even if you don't personally intend on becoming a landlord.  Because these laws will still effect you and have a major impact on your bottom line.

For example, there's a law in California that says you can NOT evict a tenant (even a month-to-month) tenant unless you have one of two things: 1) a property that qualifies for an exemption, or 2) you have "just cause".  And selling a property does not qualify as "just cause".

So be careful when people tell you that you can just "evict" a tenant after you buy it if they're month-to-month, because that's almost certainly not the case and you'll likely be stuck with the tenant.  That might not be a bad thing if you're intent is to become a landlord.  However, if your intent is to flip the property (which it sounds like yours is), it could really throw a wrench in your plans.

Nabil Suleiman · Answer

@Dana Sample

I love how easy or simple it is for other people to say, yea just evict them. lol. CA does not make it easy, and that was pre pandemic. Now with eviction moratoriums that have an end date... but don't really have an end date, because every 3 months they get extended another 3 months... ask yourself how quickly that ARV begins to dwindle. If it goes on for another year, then also ask yourself if you are taking out a hard money loan in order to purchase it, which many flippers do. You take the perspective of this possibly taking a year or more to evict a tenant with the risk of that tenant having the ability to not pay rent and also not get evicted, then you are asking a flipper to potentially go bankrupt since their loans are not federally backed, so they are not able to take on forbearance either to save themselves. This is the reason why you see these homes sitting on the market for such a long period of time. It doesn't take a lot of effort for a tenant to complain to any protection office and have the landlord cited for any request for eviction. You bring it up more than once you could be considered harassing your tenant.

Dan Travieso · Answer

yes you can start the eviction process. Not sure how long it takes in California but I would hope it wouldnt take that long to get rid of someone whose lease expired.

Dan Travieso · Answer

First and foremost, get a copy of the lease during the due diligence period. If they are on a month-to-month work the numbers assuming the tenants will be in place for 60-90 days. If it is a good enough flip deal even with a delay in the rehab than go for it.

Keys for cash is great but the tenant can always say NO if they have a lease in place so always refer to the terms of the lease.

Bob S. · Answer

@Dana Sample simple evict them, or offer cash for keys ,

Dana Sample · Answer

@Kyle J. Ya thanks. I figured if it was easy to get them out, the properties would have been gone a long time ago because the numbers on them are fantastic.

Dana Sample · Answer

@Nabil Suleiman that’s what I was thinking. I’ve never been a landlord before but I’ve heard how hard it can be evicting a tenant, especially a bad one. So I’ll just let them keep sitting lol. Thanks for the input !

Do flippers deal with tenants?

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