New Deal Tenant Issues

[James Jacobs]

I don't have any rental properties yet, but have been doing research for a couple months now and want to dive in. I found a potential deal on a duplex that I like and am investigating more thoroughly. My analysis shows that it would cash flow well and it is in a good location and fits my model/goals. I went to look at the property last night and the owner wasn't able to let me in because of an issue with a tenant. He said that the one tenant is a great long-term tenant with no issues. The other tenant is a boyfriend/girlfriend situation that is having a domestic dispute and is splitting up. The boyfriend is leaving within two weeks. The girlfriend says she can pay for the place herself. The lease is up in October and is month-to-month after that. What do you suggest I should do for due diligence prior to proceeding with the deal? Should I let a "temporary" problem get in the way of what seems like a deal worth closing? Any and all advice will be much appreciated!

[Dan Perrott]

@James Jacobs - Welcome to BP!

First - You must see the entire property and have the ability to inspect it.  This is required - no exceptions.

Remember that you will be inheriting the problems of the current landlord.  I would talk to each tenant and discuss their situations.  Do not be afraid to ask questions - remember this is business - not personal.  If you find issues that may be hard to resolve, you may want to make sure that the current landlord takes care of the issues (evictions, resigning a lease with the women only, etc.).  If the property has the potential for the long-term, the tenants are a short term issue.  Just make sure that you are not pulled into a legal mess because of the current landlord's situation.  You may want to consult a lawyer after your discussions with the tenants.

Good luck and happy investing!