House Hacking but property is fully occupied??

Question

I'm looking to do a house hack but there are times when I come across great properties that are fully occupied. This, of course, isn't ideal for my plan but I can't imagine the solution to this problem is to move on to other listings.

Is there a certain protocol or rule of thumb for moving tenets out simply so I can move in? For obvious reasons I don't want to just kick longtime tenets out, but again, leaving that deal on the table for a different invester doesn't strike me as the only move here.

Henry Lazerow · Answer

I get this questions often from clients. You need a lease ending within 60 days of close to qualify for house hack. You can also talk with owner and usually get a tenant to switch to month to month, often a tenant was wanting to end early or will take a few thousand to leave early.

Drew Sygit · Answer

You'll have to negotiate with the tenants to buy out their lease(s).

Evan Hopple · Answer

Some owner-occupant loan programs account for this by allowing up to 60 days after closing to move in. That opens up opportunities where at least one unit is on a month-to-month lease or has a lease expiring within that timeframe. If every unit is locked into long-term leases beyond your occupancy deadline, those properties usually aren't a good fit for a traditional house hack unless the seller can deliver a unit vacant at closing.

Victor Patel · Answer

The answer depends on the type of lease and your state's landlord-tenant laws.

If the tenants are on month-to-month leases, you may be able to give the required notice to terminate the tenancy so you can occupy the unit yourself. If they're on fixed-term leases, you'll generally need to honor the lease unless there's a provision allowing earlier termination or the tenant voluntarily agrees to leave.

If I were evaluating the deal, I'd look at a few options:

• Ask the seller whether any units can be delivered vacant at closing.
• Offer the tenant a "cash for keys" agreement if you need possession sooner. Many tenants are willing to move if they're given enough time and assistance with moving costs.
• Wait until the lease expires if the numbers still work.
• If none of those options are feasible, move on. There will always be another opportunity.

One thing I'd avoid is buying a property assuming you'll be able to remove tenants quickly. Delays happen, and in some markets they can be lengthy and expensive.

When I underwrite a house hack, I treat existing leases as an asset, not an obstacle. If the deal only works because you expect to move someone out immediately, I'd take a closer look before moving forward.

Ray Williams · Answer

This comes up a lot, and the answer really depends on the loan program you are using, not just tenant relations.Owner occupied loans, FHA, VA, and conventional alike, require you to occupy one unit within 60 days of closing and live there as your primary residence. Typically for at least 12 months, but this is not physically checked. If every unit is under an active long term lease with no near term vacancy, that timeline can be a real problem, not just an awkward conversation.And then the jurisdiction may have something to say about displacing tenants, but you may have already covered that. A few ways people work around it: negotiating the purchase contract so the seller delivers one specific unit vacant at closing, timing your closing date around a lease that is already set to expire, or in some cases working with month to month tenants where local landlord tenant law allows proper notice after closing. That last one varies a lot by state and even by city, so check local rules before counting on it.One thing that will not change regardless of the workaround: the appraiser still needs interior access to every unit, occupied or not, to complete the appraisal. Get the actual lease expiration dates and current tenancy status from the seller early. That single piece of information will tell you which financing paths are realistic before you get too far into the deal.This is something I consult my clients on but also apply when I underwrite my deals. Good luck!

Denise Supplee · Answer

I appreciate that you're already thinking about the tenants. Before making an offer, I'd find out what leases are in place and when they expire. That may answer your question right away.

Wale Lawal · Answer

@Mannie Perkins

For house hacking, I suggest not purchasing on the belief that tenants can be evicted, unless the law and the lease agreements are in such a way as to permit this. It is always better to look at the terms of the lease, know the tenants’ rights in your state and try to reach an amicable solution.

Good luck!

Vijay Friedman · Answer

@Mannie PerkinsThat's a common challenge with house hacking. In many cases, it comes down to the existing lease terms and local landlord-tenant laws. If a lease is still in effect, you'll generally need to honor it unless the tenant agrees to leave voluntarily. I'd make sure you understand the occupancy timeline before making an offer so it aligns with your financing requirements and move-in plans.

Rick Albert · Answer

Every state, city, and county have different rules on ending a tenancy. What would be interesting is can you add another unit to the property and that's where you live? For example an ADU or converting a garage. Just keep in mind if you are taking something away from the tenants (such as a garage or arguably backyard space), you may have to compensate them for it. But even then the numbers might still work in your favor.

House Hacking but property is fully occupied??

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