Do you keep your inherited tenants or evict them?

Question

Just looking for what landlords typically do when they come across a new investment property. I'm new to the buy and hold game, I specialize more in fix n flips but will be tapping into rentals soon. Most, if not all, multi-family properties here are already occupied by tenants, usually on month to month from what I've seen. Do you typically keep the inherited tenants and offer them the opportunity to stay with a new lease that meets market rents? Or, do you not go through that hassle, have the seller evict before purchasing the property?

Was curious to see what most people did, and the reasons behind it as it'll help me better understand what I will do in the future. Thank you!

Bjorn Ahlblad · Answer

We would not evict anyone unless we absolutely needed to. Often inherited tenants are just fine, in my experience anyway, as long as you are buying decent properties.

The last property I bought was a 12 unit apartment and the tenants all worked out. For us existing tenants have been a big part of the asset.

Wesley W. · Answer

In my experience, inherited tenants almost never work out.  My acquisitions have been from mis-managed/tired landlords of C+/B- small multis, so as @Bjorn Ahlblad and others have said, the type of asset class and quality of the management are probably the primary indicators.

I would offer them a month-to-month lease with my own terms, and see of they presented a generally agreeable/compliant kind of demeanor in the near term before proceeding to a term contract.

FWIW I only offer MTM leases because I believe term leases often favor the tenant more than the landlord in tenant-friendly areas.

Carrie Matuga · Answer

I think it really depends on the tenant. In my situation, I had an inherited tenant who had been at the property for 5+ years. She was NEVER late and her rent was pretty far below market rent. When it came time for renewal, I spoke to her and I did raise the rent, but not to fully market rent. I did this because she had lived in the place for so long that if it turned, it would have needed painting and a number of other updates that are typical after a long term tenant leaves. End result, I was happy and so was she to stay.

If it were me, I'd look at rent rolls and if there are issues with tenant paying on time or consistently not paying, I would consider having the current owner/landlord take care of it before I closed. I backed out of another deal because the owner was shady and didn't let me know that the tenant wasn't paying and actually filed for eviction on the day or two before scheduled closing.

Jonah Hartsburg · Answer

As @Bjorn Ahlblad said, inherited tenants can be fine. It largely depends on how the previous management did placing the tenant and managing their experience. In most scenarios, it's a major inconvenience to require the Seller to provide the property vacant before closing. After closing, I try to get the tenants on my lease if they are on a month-to-month. This helps set my standards, creates a pace for renewals/raising rent, and it positions me to more easily pursue a judgment in the event I would need to evict.

Paul De Luca · Answer

Three of the four properties I've bought were vacant upon closing.

I prefer to buy vacant properties because then I can rehab the place right away and I can put my own tenants in there.

The third property I bought (house hack), one tenant left before closing and I inherited two tenants. They were paying below market rents and we needed to move into one of the units plus rehab. Ultimately the tenants did leave but it took some pressure to get them to leave. Also one of the units turned out to have bed bugs and they abandoned the unit so we have to throw away all their things.

For the fourth property we bought late last year, we got the seller to agree to a longer closing date and deliver the property vacant since two of the units were occupied.

If you're inheriting tenants, make sure you're getting copies of leases and tenant payment history. Consistent rent payment history is the really important and an indicator of a good tenant or not.

Reality is that if you're buying rental properties at some point you're going to deal with inheriting tenants and as long as you have a process you'll generally be okay.

Alecia Loveless · Answer

@Faiz Kanash I currently have 25 units, 20

rented and 5 bought vacant under renovation. The 20 units all had inherited tenants. All but 2 have turned out to be great except for 2 who the sellers flat out lied about everything about them. From their pets to the number of people occupying the units to the fact that they paid their rent late every month.

Then to top it off 6 weeks in one of these deadbeat tenants got hired as my boss so I couldn’t evict her or the other side because they were related or I would have ended up getting fired.

Because the boss knew where I lived they would show up in my driveway around the 27th of the month with cash to pay the rent that was due the 3rd. Then it would repeat the next month.

I ended up selling the building for a different reason and now out of state landlords own it and those tenants have totally trashed the whole place.

The other 18 tenants have been perfectly fine even those that I have raised the rent on considerably.

Bjorn Ahlblad · Answer

I also think some areas breed more freeloaders than others. All my rentals are in cities with fewer than 25k population. Smaller town folk seem to accept responsibility better? Whatever, it is working for me. All the best!

Do you keep your inherited tenants or evict them?

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