Multi-family building, existing tenants vs vacant?

Question

I am thinking of asking the seller to have the building vacant.  The seller provided the rent income history and all four tenants for 4 apartments are late and have been late in the past.  Is that a reasonable request and how long would the transaction be delayed?

Alan Asriants · Answer

All depends on the area and goals.

In a B-A class where rents are under market and condition is not great, I would prefer vacant, renovate, and rent out

late payments, under renovated, etc are to be expected in C-D class. Might not be worst idea keeping them as long as they are paying.

Michael Smythe · Answer

@Wai-Ming Lau you would need to review the leases to determine WHEN they end.

If a lease has 6 months left, ow will the owner get the tenant to vacate?- Only by paying them to leave, which may raise the sales price.

Even if one or all of the tenants have a Month-To-Month lease, it will take a minimum of 30 days to give them legal notice to vacate. If they do NOT vacate, the eviction process in 36th District Court takes 90-120 days.

So, if you were the seller, how would you react to this request from a buyer?

Adam Bartomeo · Answer

It might not be the smartest move to have the building completely empty. Normally, the better route is to rehab one unit at a time so

1. you have some income coming in during the rehab.

2. You are not scrambling to get 4 units filled at the same time

You can definitely ask for it to be vacant but it will depend on what the lease say. Lastly, tenants are constantly late. That should be grounds to get rid of them. You should take a closer look at how far behind they get and the timelines in which they get the balance caught up. We have tenants that have been with us for years and pay an additional 10% because of late fees. Fine by us!

Greg Kasmer · Answer

Wai - I would echo comments from others. I recently bought a 4plex and I was told one of the 4 tenants did not always pay on time, so no surprise in my first month there was, you guessed it, one of the tenants did not pay. Therefore, going through the process of evicting him with my property management company. I would suggest you make the request to have the tenants leave, AND, if it delays the transaction that's no skin off your back - just keep you lender/bank in the loop! Good Luck!

Steven Goldman · Answer

@Wai-Ming Lau  Not only is it reasonable I would not do the deal without it. Good luck.

Jake Baker · Answer

@Wai-Ming Lau

It is not unreasonable to ask that and see what they say.

If you are looking to rehab, it is more efficient and cost-effective to rehab all units at the same time.