Acquiring a property with tenants in place--important questions to ask???

12 Replies

I'm considering a multi-unit buy and hold property.  I own two properties already, however, I found and placed those tenants.  

This would be my first time walking into a situation where the tenants are already in place. What sort of questions are important to ask?

This is what I've come up with:

--ask for a copy of the leases and tenant app. make sure every tenant is on  a lease, no verbal agreements

--which lease(s) will be ending soon?

--which/how many tenants have been late?  how many times? 

--are you evicting any one right now?

--what improvements/updates have you done to the property in the last year? 5 years?

--any additional people in the property that were not on the original lease (given the area, I have to ask this...it's quite a possibility)

--are any of the tenants the owner's family members?

--how do the tenants pay rent? (I ask this because my current tenants pay me by only TWO methods that are SAFE for me--electronically/online or direct deposit in a special bank account)

--are appliances tenants or owner's?

**Am I missing anything???  Thanks in advance for your help BP. ;)

I have heard there are papers you can ask them to fill out to confirm what they are paying in rent and who owns the appliances etc.  I have never seen them myself.  I would ask for tax returns on the apartment complex.  It does sometimes happen that tenants are not paying rent or are paying less than what they show you so that you will want to pay more for the property.  You might ask them what needs fixed and what is good about about the building or current management.  Find out how much is being held for deposits, they need to be transferred to you.  You also need any documentation of the condition of the apartment when the tenant moved in.  Since you did not do the inspection how do you dispute the hole in the wall was not there when they rented?  Anyway good luck.

Ask the owner or building manager how they screen the tenant and their approving process. What are their requirements? And why were those requirements important to them. 

@Kimberly Land :  The paper process that @Jerry W. referred to is called lease audit if I remember it correctly. You or someone in your team go through every single unit to confirm everyone's ID, move in date, security deposit, and rent amount. 

Check the property address against sex offenders database. See if any of these guys live there.

@Vi K.

@Nick B.  

Thanks for the suggestions. I will def keep these in mind if I submit a contract and it's accepted.  

The last place we went in contract on, I did some online checking of the people on the leases. I quickly found 9 years worth of assault/felony theft/domestic violence convictions against one of the tenants. So if you get to the contract state, a few minutes of court record sleuthing could be worth your while. Our deal fell through for financial reasons, so we didn't have to decide whether we even wanted to deal with that situation.

@Pam R.  Whoa...crazy, but good to know.  What website did you visit for this information?

@Kimberly Land  - All our city/county criminal records are online, and free. They even include PDFs and docket details. Of course, I see you're in Chicago - much bigger pond. I'm in a small town of 35,000 - pretty hard to hide here.

@Kimberly Land  If you ask for the tenant's application that's on file and its not provided to you by the current owner I would supply my own application(s) and insist that each applicant age 18 and over complete it for you.  You would be surprised how long something as simple as providing general applicant information will take...

Something that I did not do with my first rental property (great lesson learned) is to ask for concrete evidence, e.g., receipts, of the current tenant's previous 3 to 6 months rental payments.  This will help to corroborate the answers to your question above (--which/how many tenants have been late? how many times?)

@Kimberly Land  

Keep it simple:

1. lease (will have all contact info)

2. Security Deposit receipt (you will get a sellers credit at closing if they exist)

3. Last 12 mos P&L which will show any late rents 

I don't see why you'd need any other information. 

Thanks everyone for taking time to answer ...this has been so helpful.