Tricky Tenant Situation In A Flip

[Slocomb Reed]

How would you resolve this issue?

I recently came across a flip-style deal in Cincinnati, OH where the numbers looked excellent. All-in to buy and rehab the property at $160k with a conservative ARV of $220k and the possibility of selling as high as the 230s. Good neighborhood, would've sold quickly. House just needs light updating (within the $160k) and the numbers are solid.

Here's the rub:  The house was occupied by a former owner. He was facing foreclosure and had deeded the property to an investor who paid off all the liens, let him stay in the property for a year, making payments, so that he could resolve his credit issues and buy the house back (at a profit to the investor of course). After six months the tenant hadn't made a single payment to the investor, who wanted to go ahead and cash out to put his capital to work in another deal.

So if you buy the house, it comes with the tenant. The tenant will have to be incentivized to leave. 

What do you do? How much would you be willing to do/give to get the tenant out?

Would you evict and take the risk of the tenant doing extensive damage to the house (eviction takes about 45 days and $400 in attorney fees)? Would you offer to pay the tenant to leave? And if so, how much would you pay? Do you have another solution? Or would you just pass on the deal without meeting with the tenant because of the risk of inheriting a non-paying tenant who used to own the property and doesn't want to leave?

[Cara Lonsdale]

Is there a lease in place?  I would think that if there is no lease, and the investor has sold the property, there is no further understanding...and no money has exchanged hands.  What is to stop you from calling the police to remove the squatter?  That's what it sounds like you have here.

Obviously I am somewhat kidding.  You obviously have a Tenant at Sufferage, but it seems rediculous that a person not making any payments for that many months AFTER being foreclosed on, expects to continue that behavior.  That is just crazy.

I would go through eviction process.  There ARE usually quicker options if there is a threat.  In your case, you are concerned about damage.  This may be enough to get on the streamlined eviction process.  You will have to check with your area courthouse, OR call a good eviction attorney.  Let them figure it out.

Hopefully you have good liability insurance that covers proeprties during vacancy.rehab period.  THey usually cover theft and/or vandalism that may come from a situation like the one you are concerned about being in.