Is It Wrong to Kick Out a Tenant So You Can Move In?

Question

Hey everyone, I had a quick question that is more about morality than technicalities.

I'm currently looking to try to get into an owner occupied small multi-family property, to start trying to build a portfolio of rentals over the next couple years. My question is this: If there is a great property, that perfectly fits all the criteria... Do you kick out(read not renew lease) a current tenant so you can get in?

I get that it's business for investors, but not quite the same for tenants. Moving is expensive, it can be a huge shock to a family, especially when forced like that. Does anyone have any thoughts?

Thanks,
Shawn

Jerry W. · Answer

I see no moral issue in moving into a house you own.  Be fair to your tenant.  Give notice and as much help as you can.  Good luck.

Jeff S. · Answer

@Shawn Torsitano obviously it would be best if you just moved in when one of them became vacant. I hate kicking out good tenants. OTOH you could raise rents and then you could have some movement. If you have a multi you just bought and can hold it for a bit your less favorite tenant should make themselves known. Give them notice and move-in.  OTOH if you are buying with owner occ financing there is no discussion since you can't buy w/o moving in. In that case just tell whomever you want to move the situation.

Stephen G. · Answer

I occupy the rental I own, but unfortunately I had to let one of the families go before I could move in...

But lets look back at the full scenario...

I was literally looking at dozens of properties before finding the one I eventually moved into. And almost every property I looked at was 100% occupied. There was one duplex in particular that was almost completely turn-key and I could have moved in and not had to worry about a thing. But morally I felt like I had to let it go since the upper unit was being rented to a father and his kids, while the lower was occupied by his parents. Kicking one out would have meant that they both would have left, and at the time I felt that just the thought of this would have kept me up at night...

But after thinking to myself that I may eventually have to remove someone from the equation anyway, the very next property I viewed I decided to grow thicker skin.

I ended up evicting a family that had no security deposit on record (because what is a tenant if you have no leverage over them?) So they left and I moved in a month later.

Well, I bet you would have loved to see the look on my face when I found out they moved into the apartment right next door!!

Anyway, he ended up coming up to me and thanking me because his family was able to rent a larger unit from my neighbor, and had I not made them leave, they would not even have considered a larger apt.

So in the end, it worked out for everyone - almost...

In reality, he also thanked me because he was hoping to buy the property that I bought. But after seeing all the work I put into it, he said I saved him from purchasing a headache.

And he was right.

But had I set my morals aside for a moment, I could have evicted the tenants from the previous "turn-key condition" property and moved in without lifting a finger to fix up the place.

So in the end, maybe nice guys do finish last.

From my personal experience, I'd say evict the worst tenant on the premises and move in (if it happens to be a property you really, really want). Don't just settle because you had too big of a heart to kick someone out...

Andrea M. · Answer

I don't see a problem as long as you give the tenant the appropriate notice in writing.

Shawn Torsitano · Answer

@Adam Anderson  While there is a very distinct possibility that that could be the case, what I am looking at is still in the very, very tentative stages, and I'm not to the point where I would have any communication with the tenants yet. I haven't even acquired any documentation, right now I'm still just going off the numbers on the MLS.@Stephen G. Interesting, I never would have thought of that idea. And I'm not sure about how it would have worked with leases either, but that is still good info for me, thank you.Again, thanks everyone for their input, it is very appreciated.

Stephen G. · Answer

@Shawn Torsitano I required the eviction as a contingency of sale in the contract. The previous owner had to evict the tenants so, in essence, I didn't have to bother with it. And if they decided to trash the place because they were upset about it, it would have been up to the previous owner to remedy the mess.

One thing I should add:

The current tenants were under rental agreements (month-to-month) and not leases. This made it easier for the owner to remove them, provided that they didn't want to bother fighting the "eviction".

I'm not sure how things would have played out had there been leases in place instead. Then it may have been decided differently, or it may have depended on if their was some kind of "transfer of ownership clause" in the lease itself... Maybe one of the other BP members can give you better direction in the event that a lease is the dominating factor in your situation.

-Steve

Adam Anderson · Answer

I see nothing morally wrong with not renewing the lease with your tenant so you can move in.

There may be another option. You said is a multifamily. Would one of the other tenants whose lease is not up like to move out?

Shawn Torsitano · Answer

@Stephen G. When you say that you evicted them, was it just you refusing to renew their lease, was there reasonable grounds for eviction, or did you break the lease and offer up some sort of compensation? These units have also been professionally managed by a very large company, so I have a feeling there will not be a situation where no one has a security deposit.@Jeff  S. While I would like to do it that way, my situation doesn't allow for something like raising rents. The only way I can get a property at this point in time is with a VA loan. From what I've read the only exception to the 60 day move in requirement is if you can specify a later date that you will move in, and it has a reason. So while I could probably make a valid argument for waiting until a particular person's lease ended, I don't think I could leave it open ended hoping that someone would move out from higher rents.@Jesse T.  Seller financing isn't something I had previously considered for the few properties I'm currently looking at, but I will look into it to see if it's a possibility. Thank you for the idea.@Elizabeth  Colegrove Thanks for the input, that was my main concern; whether or not this was an ethical thing to do, even though it is entirely legal.

Elizabeth Colegrove · Answer

Yup!

As long as the lease is up you are good to go, unless local law say otherwise.

I personally treat it like a business. Yes it is stressful but as long as you are being ethical you are good to go :)

Jesse T. · Answer

Another option might be approaching the seller about financing the transaction.  This would allow you to own the property without having to make it owner occupied.  You should be able to give the owner a higher interest rate than the owner-occupied rate, since it will be full rented for the period that you are paying a mortgage to the seller.

The seller will likely want a balloon, but I would push that off as far as possible and point out that the premium interest rate gives you a significant incentive to refinance.