What to do after purchasing an investment property?

Question

Hello fellow biggerpockets!

I'm trying to figure out what I'm doing right and/or wrong after purchasing a new investment property.  Especially since I want to pickup another property really soon.  Details:

- I have two 4-plex that I self manage and do all the repairs myself.

- After closing on the deals, I keep the inherited tenants, keep the lease agreement from the prior landlord and give a notice to the tenants that I'm the new landlord and where to send the rent payments.

- I didn't do a review of the condition of the place with the tenants.

- I don't do a new credit check on the tenants.

- The units in each property are under market when I purchase it and I've been increasing rent by about $50/year in order to not shock the tenants.  Unless a tenant moves out, then I go in and renovate the place and bring it up to market.

Questions:

How does everyone else handle a new investment property purchase?

Do you sign new lease agreements, do a walk through, run credit checks or get rid of the current tenants?

What am I doing right and/or wrong?

Any suggestions or insight to how you handle your property will be helpful.  Thanks everyone.

Puthy Pan

Nancy P. · Answer

In every state I've lived in,  you have to honor the existing lease.  So I think your "send the rent to me now"  idea is right.  As is slowly increasing rents and renovating and getting market rent for vacated units.  Not sure what the point of the credit check is if you have to honor the existing lease.  And then,  if they're paying on time...why do you need it?  JMO.

I assume you take over security deposits as well?  I think you absolutely have to walk through every property.  I would think you could only charge them for damages done since your became the owner,  or rely on (hopefully well kept)  records from the previous owner.  You need to know the condition of the properties.

Dennis M. · Answer

Well there’s only so much you can do once you buy with tenants already in place .you gotta honor their lease and you know darn well the former LL let them get away with murder and didn’t improve or repair the property like you will  .all the screening checking and forms won’t matter much at this point .i always thought inheriting tenants was great because it eliminated headaches finding tenants and it’s already cash flowing until I actually got them .. The reality is much different ! You didn’t screen them so you can bet they wouldn’t be your tenants if you had a choice .

Nancy P. · Answer

Well,  the month-to-month lease I'd still do the walk through.  The main difference is you can get rid of them with 30 days notice,  and they can leave with 30 days notice.  I can believe if a tenant got nowhere with an old landlord they'd ask the new one.  I would!  Whether or not they are reasonable requests is another matter.  As to getting rid of bad tenants....years before we began this my husband was reading books about it.  (took him a long time to get me on board)  The books suggesting giving bad tenants money to go away.  Now,  this REALLY made me nuts,  it felt morally wrong.  We ended up evicting our VERY FIRST tenant.  He tried to slow down the eviction by claiming we were "racy"  (by which he  meant racist).  The judge didn't buy it for one second,  but my blood pressure went up so much I passed out.  So not worth it.  Since then,  three times I've given unhappy tenants their entire deposit plus unused rent for being out in a week.  Once was so testy a sheriff had to be there as we exchanged keys for a check.  She wanted cash and the sheriff acted as a witness saying if my check bounced he'd personally make sure I was prosecuted.  (There was no way that woman was getting cash from us,  she refused to sign anything saying she'd received it.  We're not THAT stupid. )   Another one,  was a Section 8 tenant who violated by moving in her boyfriend who smoked (the worst possible offense to me is smoking!).  She left pretty quietly, she didn't want me to report her,  but she did want all of her deposit back and her dog had DESTROYED the carpet.  I gave it to her,  mostly out of kindness but partly to avoid trouble.   That's 4 out of 20 tenants we've had!   My tenant screening is way more rigorous now....hopefully far fewer of those in future..

Puthy Pan · Answer

@Dennis M. - Yes, I've had the same thoughts and have encountered the same issues as you with inherited tenants.  One tenant I spent over $7k on legal fees just to get her out.  Now I'm trying to see if there is a more better way of handling the transition once I take ownership.  Would you do anything different if it was a month-to-month lease?  Thanks for your input.

Puthy Pan · Answer

@Nancy Pults - Thanks for your insight.  Yes, we take over the security deposit as well.  I'll have to work in a walk-through of the place after taking ownership of the next property.  I noticed some tenants asking us to repair this or that after we've been an owner for a few months.  Would it be different if it was a month-to-month tenant?

What to do after purchasing an investment property?

Most Popular Reply