Buying rental with tenant

2 Replies

There is an offer to purchase a rental property but it's coming with a tenant. The tenant seems to have signed eStoppel. It means the new buyer has to continue with that tenant.

Other than obvious checks (such as inspecting lease agreement, payment history, tenant job history, etc.) what are some of the extra measures I should do to ensure I am not inheriting a problem?

Also, how the inspection of the house going to be accurate if the property is occupied? 

Thoughts?

Don't take the current landlords word, that the tenant is payment on time. Trust but verify.
And the only time that i've gotten estoppels, is when the landlord can't find the lease, or the tenant is month-to-month.
Most of the time, the estoppel is bare bones: Tenant name, is it month-to-month?, rent amount, deposit amount, and do they have an option to purchase the property. So you'll want to look at what's on the estoppel.

Also you can ask the current landlord for 12 months of canceled checks, to prove the tenant is paying. And if they balk, that's a red flag that they might not be paying, and are trying to dump their problem on you.

And if I remember right from one of the pass BP podcasts, they talked about doing a 12 month escrow holdback on the rent from the seller's sale price, if they don't want to prove that the tenant is paying. And if the tenant pays each month, then the seller get a month's worth of rent from the escrow account.

@Rene Owczarski , Thank you for your response. I never thought of asking cancelled checks. This is a good one and also the escrow account for 12 months.