I was wondering if anyone had advice on how to renovate a property when there is a prior tenant who still has a lease. My strategy is to use hard money to buy and renovate then refinance to get the down payment back.
But if there is already a tenant, whose lease expiration date will not leave enough time to renovate before the hard money is due, Can any thing be done to overcome this?
The reason I ask is because I don’t want to have to return to the unit when the lease expires to renovate it with my own money, I want to do it while I have the hard money and the ability to refinance in order to pay for it all upfront.
Investor · Jacksonville, NC · Member since 2018 · 193 posts · 107 votes
5y
I have walked away from deals similar to this scenario...being that there is a lease in place that makes it tough!
-I suppose you could offer the tenant cash to break the lease early, still giving them some time to find another place... may not be a popular option but an option none the less.
-Depending on length of rehab you can relocate tenant for a week or so (if they were on board to do so) so that you can renovate the place.
Investor · Jacksonville, NC · Member since 2018 · 193 posts · 107 votes
5y
I have walked away from deals similar to this scenario...being that there is a lease in place that makes it tough!
-I suppose you could offer the tenant cash to break the lease early, still giving them some time to find another place... may not be a popular option but an option none the less.
-Depending on length of rehab you can relocate tenant for a week or so (if they were on board to do so) so that you can renovate the place.
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
5y
I turned down a deal recently because of this very problem. And I even buy with cash. I don't want to have to wait for the lease to expire to rehab and refi. Better to purchase something else.
@Chris Tarpey Thanks these two things I have heard before. Beyond that it doesn't appear there is much to do, unless their lease will already expire like 3 months through the 6 month rehab process then it could work. But yes I suppose you could offer them money to shorten the lease and find a new place.
@Eric James Thanks for sharing. I brought this up because a broker asked if I was willing to entertain properties with tenants in place.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
5y
@Matthew Williams I certainly wouldn't turn down examining a deal because a tenant is there. Now, once you review it, you may want to pass on it based on the lease. But, for example, if the lease is month-to-month, and has a 60 day notification clause, then you could notify the tenant 60 days before you non-renew the lease. This is assuming other factors too...some states might change how all of this plays out but I would at least consider the deal first.