Buying 4Plex & Need to fire the Property Mgr.

[Scott Osborn]

Hi All, I’m a newbie to BP and I’m sure this exact situation has been talked about multiple times on this site, but I also wanted to have this post serve as my introduction post as well. So, hi! I digress, my situation is that as of this AM I’m under contract on a 4Plex in Northwest Indiana and was shown the financials by the owner and two of the four units are currently past due on rent and he said he’s not sure how the property manager has allowed the tenants to get behind. One is 3 months behind and the other is one month behind. My previous rental purchases have been vacant so this is new to me. Can I fire the property manager once I close? The leases are in the name of the property management company. I manage my other rentals myself and a property manager was already a detractor, but now that I know they’re letting tenants stay for free, I don’t want to mess around and need to get the property manager out ASAP. Help! What do I do?!? Thanks for the help in advance!!!

[Linda Weygant]

As part of your due diligence, get a copy of the contract between the seller and the property manager.  Hopefully there is not a continuance clause that would mean the contract transfers to you upon property sale.

It would be pretty rare to have this in the contract, but it could happen.

If there is not a continuance clause that transfers the contract when property title transfers, then you're fine and you can remove the property manager at your convenience.

The one issue is that you will also need copies of the leases the property management company has with the tenants (you can obtain this during due diligence as well).  You probably already know this, since it seems you have experience with this already, but I figured I'd mention it anyways.

You will be required to honor the terms of those leases until the lease period ends.  At that point, you can transfer the tenants over to your lease.