Buying 2-4plex as OO, existing tennants?

[Dan H.]

Im curious, are most 2-4plexes sold fully leased or not leased at all? Is it a mixed bag? Is REO generally sold with tennants? I cant imagine the bank likes landlording but Im not sure if they can break leases and throw tennants out.

I would like to get an FHA loan to buy in the next 6-12 months as OO and Im curious if it will be an issue finding a place that I can immediately occupy. Any thoughts? Thanks

[Andrew Isaacs]

Hey Dan, in my market it wouldn't be too much of an issue to find a vacant REO multi-family. But to better answer your question, it is a mixed bag. In 2009 a federal law was enacted that protects tenants in foreclosed properties. Their leases remain in effect despite the foreclosure (as long as the tenant performs his/her end, of course).

Here's the good news for you -- if the Bank sells the REO property to an O/O the buyer can terminate the existing leases with a 90-day notice. Here's an excerpt from the National Association of Real Property Managers summary of the 2009 Act.