Does anyone have any experience with buying a property that already has tenants living in the home? How did it turn out? What are some things to look out for? What are the pros and cons?
My man @Anthony Green-Parker ! I just did this with a duplex property in Corpus. First thing I learned was that in Texas you don't draw up a new lease...the lease the current tenants are under essentially continues to remain in effect. Under most circumstances, I want rents paid via electronic means. With the renters I've just inherited, one pays half the rent every two weeks and she typically paid in cash with the previous property manager picking the rent up. So, I find myself trying to figure out how to make it work. I also have some repairs I want to do on the property and it is likely going to cost me to put the tenants up for a couple days while the work is done. Other than that, I'm happy that that I've already got paying tenants but it is a risk. In this case, I knew the renters were up to date on the rent when I purchased the property. I probably should have asked to see their individual leases earlier in the process.
@Anthony Green-Parker You first should ask yourself why a landlord is selling a property with tenants in place if they are good tenants. Ask to see the lease agreements and proof of payment for the last 6 months. Ask what was used to screen them. You don't want to get stuck with horrible tenants not paying rent, that were not vetted correctly from the beginning.
Make sure you get the deposit transferred and proof that they are paying their rent on time and in full.
My first wholesale deal is a triplex with two tenants. Lease expires on both this month. Neither have paid rent because they're afraid of eviction under new ownership. Problem I'm having is the seller doesn't want to sign the contract because of the deposit transfer, taxes paid during escrow and rent that is owed. I believe my investors have agreed to pay the funds owed to the seller in addition to the sale price. And should close soon. Just one thing to consider when buying property with tenants in place.
The Biggest item you would want to get asap is the lease and all addendums. The Monthly Statements just show what was paid but the lease will show you what you are agreeing to when you become the Landlord. You may be responsible for Lawn Care, Pest Control, Utilities, Trash, etc... Know what you are buying with the property, if you have any reason to believe the numbers don't exactly match up you can require the seller to provide estoppels from the tenants confirming that the rent prices are accurate and there are not "verbal agreements" for paying rent late on the 15th or anything not agreed in writing in the lease. These forms are also helpful in finding the areas that are opportunities to increase value and profitability if they are not charging for items that should be paid by the tenants you can increase income streams pretty quickly when buying from an inexperienced Landlord.
@Anthony Green-Parker I bought a 4 Plex in February with 4 excellent tenants in place. Two fairly new tenants, one that has lived there 6 years and one that is going on 21years.
The sellers were out of state for the closing and “couldn’t” transfer the security deposits at the closing because they didn’t have the correct checkbook. Since they had been trustworthy about everything else we agreed they would pay me when they returned north for the summer and four days ago I got that check.
In the future I would recommend making sure you had the security deposits and all other funds at closing as I could have been out $3500.
Also make sure you get copies of everyone’s leases.
There is also coin-op laundry in the building and I suspect someone has a key to it and is stealing some of the money from me each week. I live about 30 minutes away and it isn’t feasible for me to go check the building and laundry machines more than once or twice a week unless a tenant needs me.