First time buyers purchasing duplex

5 Replies

Hi - please help us with some advice. We are purchasing our first income property and it is a duplex in a D neighborhood - low income neighborhood but the duplexes all rent well. It's less than 2,000 sqft total and has 3bd, 1bth. Sold as is. Seller is paying for inspection and both units occupied right now, but 1 unit will be vacant soon. We made and offer and the seller countered by 2,000. We are firm on our price and confident they will accept. Our question(s). Any advice on contingencies regarding the tenants - money in escrow until they are removed? Any other contingencies we should/can do - if inspection finds a,b,c? Confident it will rent after cleaned and minor repairs done. 10,000 budget for repairs so when the inspection comes back - what are we looking for that is too much to take on? The one tenant who wants to remain lives in filth - I know we don't live there and renter is a renter - but when is the disgusting too much? I guess I'm not too worried I won't find a renter after we clean the place up and show it a little love - my fear is that if he stays he will make the vacant side less attractive. Has anyone ever had a renter in a duplex less the value of the other unit? This is our first buy and we are excited. The numbers make sense and we are countering just want any extra advice about duplexes, contingencies, tenants. Thanks!

Hi, and congrats on making an offer!  Is the "filthy" tenant on a month to month?  Also - filth can be subjective.  If the current tenant is creating a problem from a curb appeal stand points, has odors coming from the home,  or is otherwise degrading the value or safety of the units, I would definitely move them out if you are able.    If they are simply messy on the inside of the unit and just don't clean up to your standards, that might be a different story.  I would also nose around and talk to neighbors - they often notice more about tenants and the condition of a property than an out of touch owner.  Wishing you the best!  

Steve,

Since you have already made an offer it seems that you are intent on getting the property, regardless. If you come back with contingencies after making the bid, and having the seller counter you, you might weaken your hand, i.e. seller will think that you are not serious.

That said I think the best thing you can do is to get the deal under contract (with inspection contingency) and then review all the lease documents for the residents. I would also make sure you get an independent inspector to inspect the property (so that they dont work for seller) Make sure that you understand what the current agreement is, and what you can and cannot do. Do you have knowledge of MI landlord tenant laws? If not I would go to your local landlord association and get some advice on what you can do.

I typically inspect units and anyone who doesn't follow their lease in terms of cleanliness and habitability gets a 3 day notice to cure. If they dont follow the rules they are evicted. YOU HAVE TO MAKE SURE YOU UNDERSTAND YOUR RIGHTS AS LANDLORD AND TENANT RIGHTS BEFORE YOU DO THIS. if you dont it can come back to bite you. I believe some states/cities have protection for hoarders so you want to know about this too.

If you do get the property make sure you screen any new residents, and that you have a clear policy on your rental qualifications. This can help you mitigate problems down the road.

Please let me know if this answered your question. 

Christian

I always do an inspection contingency and if the property is occupied I add a "property must be vacant" clause as another contingency.  I don't like inheriting tenants because my manager was not the one screening them.

Another tip....if you have 10k to throw at repairs could that extra money get you into a B or C class area?  Putting that money into a D class asset will probably not really raise the overall value as house prices tend to average out at what the neighborhood will bring.  Just something to consider.

Steve, you may want to check out my BP blog and my e-book on Amazon, I specialize in low income.

Get used to tenants living much differently than you do, and not taking care of things.  Make sure any upgrades you do are very durable and only things that will save rather than cost you money in the long run, are typical for low income properties, and are thing slow income applicants value.  We've learned that they love crazy colored interior paint.  

Other tenants can reduce the desirability of a duplex.  We had a tenant throwing up out his front yard every morning, the neighbors loved that.  Another threatened to leave after this neighbor almost burned the place down.  But really, it has more to do with what is going on on the entire block than what is going on right next door.  Look at the whole block for potential to decline or improve when deciding.

Don't be afraid to walk away after inspection if need be.  We could take on a lot, but not old fashioned wiring, an un-permitted second story, or a fire in a basement.  Good luck!

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