Looking at inheriting tenants, how hard to terminate leases?

Question

Hey Portland REIers,

My agent just sent me an amazing deal for a multifamily BUT I'd have to inherit tenants that are 70% undermarket rents. The property won't cash flow until I get the tenants out, rehab the units and lease tenants at market rents. How hard is it going to be to terminate the existing leases? What options do I have for a quick turn?

I'm still waiting to hear from a lawyer...but want to ask the hive mind first!!

Thanks in advance!

Tyler Combs · Answer

Hey Frank, I've inherited many a tenant in Portland, and I run my performas assuming they will be there a for a while.  If you want them out quickly, plan on paying the mandatory relocation fee.

Brad Hammond · Answer

This sounds about right for most multi-family properties in our area, under market rents asking full price.  I would negotiate on the price but besides that, it's going to be difficult to get the tenants out.  You need to have a reason to terminate their lease or not renew it.

Bruce Woodruff · Answer

Worst city in the US for Landlords. I'd look somewhere else, unless you like drama and making your hard-earned dollars the tough way...

https://sparkrental.com/anti-l...

Kelly Asmus · Answer

There are exemptions. Here are the full rules here:Mandatory Renter Relocation Assistance | Portland.gov

Frank A. · Answer

Thanks for the responses everyone. All the leases are month to month. Are there any Construction/Rehab clauses for terminating leases in PDX?

Bruce Woodruff · Answer

How is that a great deal? A bunch of run down units with negative cash flow?

Sorry, had to ask.......

Eliott Elias · Answer

You could buy their lease out. Chances are they are not going anywhere until the lease is up

Greg Scott · Answer

When you buy a property, you also buy the leases.  So, if some of them don't expire for 2, 5, 11, or 19 months, for example, you get to wait until they do.  As those leases are coming up, you can tell the residents you are not renewing their lease.  After they move out you can rehab.

Now in some areas, perhaps Portland, there are also rent control laws that impact your ability to raise rents between tenants.  Some properties also have LURAs or other restrictions that may inhibit your ability to raise rents.  You should conduct thorough due diligence to understand if those issues apply to this property.

Looking at inheriting tenants, how hard to terminate leases?

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