Buying a property with tennants paying below average paying rents

[Skylar Martinez]

Hello BiggerPockets Community,

I found a property that seems like it would cash flow positively ($1600) based on market rents. However, the existing tenants are paying about half of what current rates appear to be, according to my research on Rentometer, Apartments.com, and HotPads. The property is a 6-unit building in Los Angeles.

Given the significant difference in current rents vs. market rates, I'm looking for advice on how to legally and ethically approach raising the rents to reflect market value, should I decide to move forward with the purchase.

Some additional context: even if I were to negotiate a better (reasonable) price and were to successfully evict a tenant who is 5 months behind on their rent and charge the market rent for that unit I'd still be -$600/month. 

What are the best practices in this situation, especially considering any local laws and regulations that might apply? I understand the importance of being a responsible and ethical landlord, so I'm seeking guidance on how to navigate this transition smoothly and fairly.

Thanks in advance for your insights!

[Sebastian Marroquin]

It sounds like you need to consult with Eviction attorney, CPA/ Tax professional, Great Realtor and Lender for this. DO NOT close escrow before talking to these people. 

I have a great attorney in LA if you would like. DM me.  Unfortunately 98.7% of landlords that are selling these type of properties, do so bc of low rents and bad tenants… so you will have to solve that problem. But many investors get rich and build wealth buying "value add" properties like this one. Just make sure you don't over pay… That's a math calculation. 

Get a good realtor that can walk you through this! GOOD luck