Tenants in a 4 unit multifamily, what are our options?

[Jorge Leon]

Hi all.

My parents are looking to purchase a 4 unit near their primary residence. 3 of the units are rented and one is vacant. The tenants have the right to stay until their lease ends correct? At which point rent would negotiable if they want to renew? The reason I am asking is because the units seem to need some work, and although we are not in an immediate hurry, we would need them vacant for that, we're just looking at our options. 

Also, it is my understanding that rent being currently paid can be used to calculate whether their DTI qualifies, is this correct? Can we ask the listing agent for information regarding how much they are paying? Would they provide payment history for use in loan qualification? Any advice would be appreciated.

[Patricia Steiner]

When you buy a rental property, you buy the whole enchilada (tenants, problems, property) UNLESS you negotiate otherwise.  You would have to honor the leases if you accept the property as tenant occupied.  I prefer to acquire as "Vacant Possession" and have the current owner deal with his tenants and their departure whenever possible.  If you do accept it as tenant occupied, you should include in the purchase contract that all tenant applications, screenings, rent roll and payment histories are to be provided to you within 5 days of an executed contract.  If that information isn't acceptable, it's best to make it the owner's issue rather than buy his problems.

As far as rental income used in DTI, most lenders will only consider that income as evidenced by annual leases in place.

Hope this helps.  Best...