What are we forgetting?

Question

Having never purchased a property wih a tenant already in place, we are trying to use caution.  We made an offer with all the normal contingencies and in addition, we added contingent on proof of last 6 months rent payment, and satisfactory examination of the lease.  What suggestions do those experienced in this have for us?

Joe Villeneuve · Answer

@James Wise Why does it seem as if great deals are treated skeptically more than as opportunities...then the same investor that utters the words, "...sounds too good to be true...", follows with the words, "...there are no good deals out there".

James Wise · Answer

Good advice Justin. Really focus in on the house. Homes are not valued by how they perform as investments. They are valued based on comparable sales.

Investors should realise even if a tenant is a good tenant they can still go rogue. All tenants are good until they are bad.

James Wise · Answer

@Tom Shepard

I really would not concern myself to much with why they are selling.Not every person who owns a single family rental got there with the intention of being a real estate investor.  There could be a million reasons why they want to sell that have nothing to do with the property being a good investment.

I would focus on it being a nice property in an area you like that is priced well compared to the comps.

Jay Rogers · Answer

You have a point there that why are they selling.

I actually advice you to ask this to the owner itself. I also suggest you to feel freedom and ask each and every doubts to them because its matter of money! Be frank and ask!

Tom Shepard · Answer

Thanks for all the feedback!

Unfortunately in our state we have to continue the lease as is, and keep the tenant unless they break/violate the current lease.  Have found out since that they have paid each month for the last 12, they pay on the 2nd of the month via auto-debit, and they just signed a new lease that will expire in November 2016...terrible time for a least to end, but it is what it is.  My big question I will try to find out is why if they have what appears to be a good tenant in place is the owner selling the property?

Joe Villeneuve · Answer

You can't run the tenant through a credit check.  They are not his tenant, and they have already been approved to be tenants.  That's invasion of privacy...and you can ask them, but no tenant in their right mind, that was already living in the house on an existing leas, would ever agree to it.  Why would they?

Jeff G. · Answer

I seek out properties that have existing tenants.  My first duplex had tenants who were paying market rents, upper tenants had been there 5 years lower 7 years.  That's a dream scenario in my mind.

I am looking at another duplex right now similar situation, only these tenants are paying above market rents.  Cash flowing the day of closing is a beautiful thing.

Mike Cumbie · Answer

When I was in that position my lawyer added a contingency that we needed a letter from the tenant stating that there was nothing owed to them that was not in the lease and more importantly nothing that needed fixing.

It helped because the tenant had a few minor items to fix (which I took care of on day one) but it let me know that they were happy tenants and if anyone would know about a furnace/leak/roof issue they would be happy to spill it.

Matt Motil · Answer

You need to understand the laws in the state where the property is located, as well as the terms of the lease that was in place with the previous tenant and landlord/owner. If the state doesn't force you to carry them over and the lease doesn't force you to carry them over, then you can start the eviction process if you want. Like I said, check the local laws and read the contract with the tenant.

You always need to be concerned when buying a rental property with existing tenants. People love the idea of turnkey, but forget that it's really easy to throw a crappy tenant into a unit for the purposes of getting a "turnkey" sale done fast. There are some people I know that will not touch a rental property with existing tenants in there. Other people won't touch an empty rental.

What are we forgetting?

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