do you think they are OK tenants?

Question

Hello everyone,

my husband and I were searching for a vacation home in VA. we found a property (half of duplex) we liked, but it is being rented till Q2 2021, with tenants who have been there for 3-4 years, paying somehow below market rent. We later realize the tenant's mom lives on the other duplex next door. (how weird is that!?)

I asked for the rent roll and was told by the agent, the tenants have only been late once during their stay. But it turns out, in the past 12 months, they have been late 4 times, paying $125 fee four times, twice, they had to pay partial every few weeks to make the rent. They don't have a balance now, and have never been more than 30 days late.

I feel quite uncomfortable about these facts, we have long term tenants in our units where we don't charge market rate, but they have never been 1-day late on paying us rent. they are GREAT tenants.

Now, I have no intent of keeping these VA tenants, but given the mom lives next door, would that just be a little awkward if we end up using it as our vacation home?

Should I walk out of the deal?

Thanks!

Joanne

Joanne Tsai · Answer

@Joe P.

Thanks Joe, that’s my feeling too (inheriting someone else problem...)

Joe P. · Answer

Ultimately up to you then to take on the risk and if the investment is "worth it".

Maybe they're looking for a new home, or are hoping to keep things "as-is" as it probably is the best living situation they could have for mom next door. Something tells me the owner is passing on a problem to you with this sale, but that's just my spidey sense going up from the information you've shared.

Joanne Tsai · Answer

@Joe P.

Hi Joe,

thanks for your advice, but they did renew the lease back in Feb so it cannot be terminated till April next year. Yes and the seller wouldn’t sell it if new owner won’t honor the lease.

Joanne

Joe P. · Answer

Certainly a tough "people" situation, but not a tough "investment" situation. There isn't much recourse for the daughter-tenant...the seller is selling. I'd personally want it delivered vacant if I had no intent on keeping a tenant there. With no other considerations I'd want that unit delivered vacant upon sale. And then day 1 I'd go and meet the next door (mother) to establish a relationship.

Now, the considerations matter here. The lease may be midway through a year-long lease and it cannot be broken. We're in the middle of a pandemic and putting someone out on their rear-end is probably not a favorable outcome for anyone.

As a buyer you need to do your due diligence to find out the details above. If the daughter is on a month-to-month lease it would be far easier to terminate that agreement with notice and coincide with your close date.

Above all else -- get the information necessary from the seller and consult a local lawyer on what's advisable. I'm not a lawyer and the information provided above is not meant to be used a legal counsel.

Joanne Tsai · Answer

@Joe P.

The thing is the mom actually owns the other half of the property and her daughter is renting the other half. The owner on this side is selling the daughter lives in. My agent just told us “they are probably not going anywhere if you want long terms tenants”....

we’d like to use it as a second home and access the property from time to time and do short term rentals when we are not there since it’s a vacation town. Appreciation of that town isn’t great, the only way we can make the number work is to do short term rentals, def not with tenants who pay below market rent......

Joe P. · Answer

So your intent is to use half the duplex for your own vacation purposes, keeping it vacant for your use only, and then renting out the other half, hopefully with a long-term tenant who is signing a year lease?

If so, I think its going to be difficult keeping both tenants. They're obviously going to be on the same team, and if you kick one person off the team, the other person is not going to be happy.

But, the property is for sale, so let them be mad at the seller, not you.

Request the units be delivered vacant, clean, in good condition, end the leases, etc. if the above intent is correct. You may have to check with a lawyer if this is appropriate in your area.

Theresa Harris · Answer

Look at when the rent was late. Was it since March (covid) or maybe Jan/Dec (Christmas and poor budgeting)?

I agree with the others that if the place is well taken care of and a good deal, go for it.

David Barnett · Answer

@Joanne Tsai I'd likely ask the agent about the disconnect. I'm not saying this is the case, and I dislike people that are not honest. To me, it seems like the agent was not being truthful with the payment history of the tenant. I'd probably change the offer to take into account the new information about the payment history of the tenant. There's some risk that they won't pay and you'll need to go through eviction proceedings (when this opens back up in VA, if there is a moratorium).

Shamar Gregg · Answer

Based on the narrative above, I would honestly say it all comes down to personal preference.

For one, if it is a really good deal, I personally would not pass it up. Once I become the owner, I would just remove all tenants. This might sound harsh but as I stated if it is a superb deal, one you can't pass up, I would take this route. This is because yes, I do agree it probably would be somewhat awkward to have the mom still living there.

OR you just removed the one that is always late and keep the mom.

If this is a property you really like then don't let current renters sway you from the deal.

My 2 cents.

do you think they are OK tenants?

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