Are there issues with buying a property with long term tenants?

[Vincent Lattuca]

I see a lot of properties that are listed have long term tenants that have rents well below market. Is this something that is hard to overcome when buying a property? How do you overcome it?

[Nathan Gesner]

Quote from @Vincent Lattuca:

I see a lot of properties that are listed have long term tenants that have rents well below market. Is this something that is hard to overcome when buying a property? How do you overcome it?

This is asked almost daily and the answer is, it depends. 

One of the reasons for purchasing a rental like this is that Tenants are below market so it has potential to increase rents and increase your return. I highly recommend it.

There will be some difficulties. In my experience with thousands of renters, Tenants that are below market tend to treat their rental poorly, pay poorly, and are generally more difficult. You may find they are behind on rent regularly or that they have unauthorized pets or people living with them. Just expect there to be more problems than usual.

If they are under a term lease, you can't make changes until that lease expires. This could delay your increases, renovations, or other plans.

If they are bad renters, getting them out may take some work and even an attorney. This is especially true in states with Tenant-friendly laws and backed up courts.

If the Tenant is more than 15% below market rent, then I suggest getting them out as soon as the law allows. Clean the place up and rent it at market rate to a new tenant that you've screened/selected, and under your lease.