Need Advice or Suggestions

[John Laseter]

Hello, I just noticed that a investor/investors just listed three units for sale that are "tenant occupied". Any suggestions on how I should approach this? The units were listed separately, and I just happed to notice that they were all listed by the same person. 

[James Mc Ree]

It's good news and bad news. Good - You should have instant revenue if you buy. Bad - Someone else picked the tenants and you don't know their vetting criteria nor the lease terms.

Start with seeing the property like you would for any other property. Review the seller's disclosure and do all of your normal due diligence. Check for how long the current tenants have been in the property and assess the property condition. Do they seem like good tenants? It's great insight since the tenants are living their normal life there versus a staged home.

You may be able to talk with the tenants if they are there when you see the property. Ask them if any maintenance is needed and how much they are paying for rent. I've tried asking if any maintenance was needed in various ways and never got a "Yes" in any form, even when there were obvious problems, such as paint peeling off the ceiling and a wired smoke detector hanging from the ceiling by the wire. Tenants probably don't want to get their landlord mad at them and they don't know the people walking through.

Ask Seller/Landlord if tenant is current on rent and how much they are paying. Is it the same number the tenant told you? Request a copy of the lease for your review if you decide to offer. You can make this an offer condition and review it during your due diligence period.  Also, request the tenant info provided in the application process so you can see the type of tenant who was approved. You will also need this info for contact information, etc.

Request in your offer a letter signed by both the seller and tenant agreeing on the current value of the security deposit. You will get the deposit when the transaction settles and you don't want the tenant coming back later saying it was more.

Try to get pictures of the property before the tenant moved in to establish move-in condition. Seller/landlord should have taken these pictures. You will need them to establish damage claims against the tenant's security deposit when they move out to avoid the "It was always like that...." claim.

These items are what quickly come to mind. I am sure there is more.