Purchase With Tenents, Any Harm?
I am looking at a multi family home in queens, new york. It is in a great location. All the calculations workout. My only concern is that I must accept the tenents with the purchase. What should I look for when accepting the tenents? I need to interview the tenents correct? I need to also scrutinize the lease agreement that the previous owner had with the tenents as well? Any suggestions? FYI: I have always purchased units that are vacant. I'm not sure if this is drowning myself in deep waters.
Off the topic but do you have trouble finding insurance when purchasing vacant rental properties? Or do you first rehab the properties?
To your question, I like when there are tenants there already because then you don't have to find them. You should look at the leases and make sure that you hold them to the lease. Also make sure the security deposit is given to you at closing. If you have a bad tenant, you will likely just have to get a new one. In Iowa, we are landlord favored so it is pretty easy.
Depends if the unit is classified as a personal or investment property. I like to put as personal since its less expensive. When do you request for the tenents deposit transfer to the buyer? Also, is there any way I can find out if the tenents are prompt on the monthly rent. If the existing lease contract is not of my standard, can I have the tenents sign another lease agreement or an addendum? Thanks for the advice.
Dear Doll,
You pretty well take over things as they are. You hope the recording and receipts for rents paid are readable and that gives you your payment patterns. The leases or rental agreements stand as is. Check them carefully as you want to know any non standard items. The aassignment of deposits is trans to you at close or at close of escrow whatever system you are using.
Good luck, you seem to go a long way to make your investments. I am puzzled, why you do not play your game close to Belmont.
My very best Lucius
this is my first rental propery and Im looking for some advice..
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mfparks,
Rather than hijacking this thread with a new question that digresses from the original topic, post your question in the forum as a new topic.[ Edited by DaveT on Date 01/06/2004 ]
Lucius is spot on. When you buy a property with tenants you are taking over the previous owner's position on the lease and you are bound by its terms. You can renegotiate when the term of the lease expires.
My experience has been very good with regard to existing tenants. If they were troublesome, the previous owner or management company would likely have removed them (if lease terms are violated).
When I buy properties I usually insist that the previous owner find tenants before purchase. This means my cash flow is hitting the ground running. I have not had bad experience with these tenants either.
I hope this helps.
Regards,
Ed
Always get copies of the leases. I check these as part of the due dilligence after the offer and before the closing. I also ask for the rent roles, expenses, etc for the past 24 months.
Also, it is common practice to raise the rents with the purchase of a new property, customarily done with the renewal of the lease.
Quote:
On 2003-12-03 01:52, doll wrote:
Depends if the unit is classified as a personal or investment property. I like to put as personal since its less expensive.
If you are answering Frogger's insurance question, be CAREFUL. If you disclose incorrect information to the insurer, such as occupancy or usage, good luck getting a claim paid. Just my 2 cents...
Also, depending on the quality of the tenant, it could be a very good thing. Just make checking the scenario part of your due diligence. Good luck!
One advantage of getting your own tenants is that you know who you put in your property. Another interesting point is that sometimes the seller is selling because the current tenants might not be the best? Why would a seller sell a property with good tenants and positive cash flow at a decent price? would you?
bigtime,
I have picked up many properties with good tenants and positive cash flow. Two reasons why the sellers have sold to me are retirement and 1031 exchanges. I live a long way from my properties so I am not able to show properties to a stream of potential tenants. If I find a property where tenants have been there for over a year, there is a reasonable chance they are good tenants. So far , they (almost all) have been.