Inheriting tenants

[Andy Perez]

I am about to close on a 4 plex (multi family) is that has paying tenants, however I feel that there is a lot of secrecy and things I am not being told about the tenants in the home. According to the listing agent and the owner, the tenets are up to date and paying each month. However, none of the occupants know that the house is being sold. In addition, I asked about security deposits and the owner tells me that most of the tenants used it up when they fell behind on rent, but told me that they have always paid on time. Didn't make sense. This is a great deal, so I still want to buy it regardless of the red flags with the tenants. So, the question is... How hard will it be to get rid of the occupants once I get possession of the property? I live in New York, this will be my first home using FHA 3.5% down and the property is a short sale. Any advice will be helpful.

[Logan Allec]

Security Deposits.  Before escrow closes, you want to make absolutely sure of the amounts of the security deposits that the current tenants has on deposit with the seller. And after you’re sure of what they are, you want to make sure that everybody else—the seller, the escrow company, and the tenants—all agree with you on what these amounts are. You don’t want to think that Tenant Tom’s security deposit with the seller was $600, while Seller Sally thinks it’s $400, while Tenant Tom himself thinks it’s $1,000!

I actually ran into this problem on my FHA owner-occupied fourplex, and I didn't catch the error until after escrow had closed. I had only been credited for $1,000 in security deposits through escrow, while upon review of the lease agreements and discussion with the tenants, the security deposit amounts were actually $3,000! Thankfully, I was able to work with the seller and her agent to collect the additional monies shortly after escrow had closed.

Getting the Tenants Out.  With respect to getting the tenants out, let's start with this: do you know if they're currently month-to-month or in the middle of year-long leases?  If the latter, when do their leases end?  I ask because, in general, you inherit the existing leases.  Also, are you buying a property that's under rent control?