Selling my duplex with tenants in place, need some advice

Selling my duplex with tenants in place, need some advice

Columbus, OH · Member since 2015 · 8 posts · 5 votes

Hello fellow BiggerPocketers,

It's been a very interesting road the last 6 years that I've owned a duplex in the city I live in (Columbus Oh).  Thank you to all the people that supported me in the early journey, a special thank you to @Marcia Maynard; she went the extra mile and even extended her direct contact to offer advice. Also her landlording with integrity seminar made the most impact in the way I approached all ladlord-tenant issues I  encountered and highly recommend it.  Being a landlord has provided very valuable lessons about persevering, being honest, treating people with respect, and being firm. And that when unsure, accept that you don't know and it's OK to seek professional advise (here, and from a legal professional).

Life has taken a turn and I need to exit, for now, as I know I'll most likely come back to it again, and it's time for me to seek fellow advice on some things that are yet unclear.  So below is my situation......

I have long term tenants in the duplex and have decided that I will leave in place, the real estate agent that I'm working with has confirmed that given the current market he sees no issues with that decision. However, I am now trying to understand what really happens to the Rental Agreement once the sale is complete and the overall things to consider as the sale goes through.  Here are some key points and my questions.

- The tenants on both sides are month to month, my rents are just a bit under the market.

- I am planning to have a conversation with the tenants to let them know what is coming; I don't foresee any issues, but one never knows.  I've always been honest and upfront about everything (good and bad) and they are happy where they are (they've expressed that). Should I make this formal via a written Notice and provided it once I have this conversation?   Any advice on how to approach this would be much appreciated!

- I'm assuming that the buyer will want to see the entire Rental Agreement as part of his/her due diligence.  Is it advisable to disclose this documentation?  Is said Agreement "transferable" with the sale of the property?   Or does it become null once the sale is complete? 

- Can the buyer actually turn around and continue using my Rental Agreement? 

- I understand my obligations as a landlord continue up to the time the sale is complete, are there any considerations I should make when that point is reached, or from that point on is the buyer's ball game?

I'm sure there's out here someone that can help me understand some of this and perhaps give me a few other good pointers.

Thank you for taking the time reading my post and look forward to your feedback.

Pablo

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Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
5y

@Pablo R. this is the template we give o all tenants in this situation: https://drive.google.com/file/...

Your tenants are month to month...so, the new owners can keep them or issue notice of non-renewal...this is per Ohio Revised Code and notice must be given at least 30-days prior to the rental due date (nobody ever gets this timing right and usually ends up violating tenant rights without knowing it)

A standard due diligence period should be in place...this is really a check list exercise...the buyer would typically request financial records and leases for at least the last 12-months- this is pretty standard.

An estoppel may be executed if they are using a lender, but not always...these aren't normally part of the transaction on small MF.

The rental agreement stays in place, but can be replaced by the new owner with a new lease for term...or amendments could be added for rental increase...passing utilities back to tenants, etc.

All things constant, just do what you have been doing until the property closes...your duty ends when the property sells.

Here is the 1-pager we use to guide a buyer through due diligence: https://drive.google.com/file/...

Let me know if you have any follow-up questions and best of luck

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  • Rental Property Investor · Member since 2018 · 46 posts · 11 votes
    5y

    Yes, the new buyer will buy subject to tenants rights. You will have to provide leases during the due diligence process and they may ask for estoppels, who is your realtor ?

  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Pablo R. this is the template we give o all tenants in this situation: https://drive.google.com/file/...

    Your tenants are month to month...so, the new owners can keep them or issue notice of non-renewal...this is per Ohio Revised Code and notice must be given at least 30-days prior to the rental due date (nobody ever gets this timing right and usually ends up violating tenant rights without knowing it)

    A standard due diligence period should be in place...this is really a check list exercise...the buyer would typically request financial records and leases for at least the last 12-months- this is pretty standard.

    An estoppel may be executed if they are using a lender, but not always...these aren't normally part of the transaction on small MF.

    The rental agreement stays in place, but can be replaced by the new owner with a new lease for term...or amendments could be added for rental increase...passing utilities back to tenants, etc.

    All things constant, just do what you have been doing until the property closes...your duty ends when the property sells.

    Here is the 1-pager we use to guide a buyer through due diligence: https://drive.google.com/file/...

    Let me know if you have any follow-up questions and best of luck

    Realize Multifamily Group11 Review
    View Page
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Pablo R. The only other important thing to pay attention to is how the numbers look on your settlement statement...rents will be credited to the new buyer...based on the days they own the property...so, collect rent as you normally would and let the title agent know what you collected...no money changes hands between you and the buyer. The same is true if there are security deposits...they are credited to the buyer, so they are responsible for distribution if the tenants move and are entitle to getting it back (assuming there is one). If you title agent is good, they will look at water/sewer and this may appear on your side of the settlement statement as a reduction from proceeds...same concept with property tax...but that's another discussion...

    Realize Multifamily Group11 Review
    View Page
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Pablo R.

    A duplex with M2M tenants or one side rented and the other side vacant is your best bet to attract owner occupant top payers.

    Leases will transfer to the new owner so whatever you have will continue unless cancelled by the new owner or a new contract is put into place.

    I think everything you have now sounds ok.

    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Pablo R.:

    Hello fellow BiggerPocketers,

    It's been a very interesting road the last 6 years that I've owned a duplex in the city I live in (Columbus Oh).  Thank you to all the people that supported me in the early journey, a special thank you to @Marcia Maynard; she went the extra mile and even extended her direct contact to offer advice. Also her landlording with integrity seminar made the most impact in the way I approached all ladlord-tenant issues I  encountered and highly recommend it.  Being a landlord has provided very valuable lessons about persevering, being honest, treating people with respect, and being firm. And that when unsure, accept that you don't know and it's OK to seek professional advise (here, and from a legal professional).

    Life has taken a turn and I need to exit, for now, as I know I'll most likely come back to it again, and it's time for me to seek fellow advice on some things that are yet unclear.  So below is my situation......

    I have long term tenants in the duplex and have decided that I will leave in place, the real estate agent that I'm working with has confirmed that given the current market he sees no issues with that decision. However, I am now trying to understand what really happens to the Rental Agreement once the sale is complete and the overall things to consider as the sale goes through.  Here are some key points and my questions.

    - The tenants on both sides are month to month, my rents are just a bit under the market.

    - I am planning to have a conversation with the tenants to let them know what is coming; I don't foresee any issues, but one never knows.  I've always been honest and upfront about everything (good and bad) and they are happy where they are (they've expressed that). Should I make this formal via a written Notice and provided it once I have this conversation?   Any advice on how to approach this would be much appreciated!

    - I'm assuming that the buyer will want to see the entire Rental Agreement as part of his/her due diligence.  Is it advisable to disclose this documentation?  Is said Agreement "transferable" with the sale of the property?   Or does it become null once the sale is complete? 

    - Can the buyer actually turn around and continue using my Rental Agreement? 

    - I understand my obligations as a landlord continue up to the time the sale is complete, are there any considerations I should make when that point is reached, or from that point on is the buyer's ball game?

    I'm sure there's out here someone that can help me understand some of this and perhaps give me a few other good pointers.

    Thank you for taking the time reading my post and look forward to your feedback.

    Pablo

    The buyer will have to honor your leases in the state of Ohio. 

  • Columbus, OH · Member since 2015 · 8 posts · 5 votes
    5y

    @Farris Gosea, @Brandon Sturgill, @Marc Rice, @Remington Lyman, thank you all for all the feedback.  This really helps clarify a lot of things.  @Brandon Sturgill your forms are clear and I appreciate you sharing with me.  I'm starting to put everything together to offer the tenants notice of what's coming; I'm hoping that will go smooth.

    Cheers all and have a great weekend.

  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Pablo R.:

    @Farris Gosea, @Brandon Sturgill, @Marc Rice, @Remington Lyman, thank you all for all the feedback.  This really helps clarify a lot of things.  @Brandon Sturgill your forms are clear and I appreciate you sharing with me.  I'm starting to put everything together to offer the tenants notice of what's coming; I'm hoping that will go smooth.

    Cheers all and have a great weekend.

    Np!

  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    Glad to help. Best of luck

    Realize Multifamily Group11 Review
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