Eviction

[Caleb Charles]

Hello Biggerpockets, I have a questions regarding eviction or possible evictions. I am currently under contract with an owner who is in pre foreclosure process. The property is a 3 family, and I currently have it below appraised, and market value. Even with though the property needs work the price that I am purchasing it for and putting into it will still be below appraised value. I've had this property under agreement since Thanksgiving. Thereafter, we decided that is would be best to have closing on the 2nd of January to allow the two tenants that live on 1st and 2nd unit 30 days to leave the property. They have been tenants at will for sometime and haven't been paying either. During P&S we decided we'd extent closing to the 9th. A week prior to closing we were informed that the tenants haven't found a place, and it doesn't seem the seller wants to do eviction. I forgot to mention that I will be renting back the 3rd unit to the seller for up to 6 months until he finds a place. Now on January 9th I agreed to give the seller two more weeks to get the tenants out. My finance people, who are hard money are asking for status because that two week is approaching. (Closing on 23rd) they suggested either taking the tenants on and conduction an eviction if he can't deliver vacant or walk away. Now if he doesn't deliver of vacant he will have breeched the contract. My question is what is to be done? I've never done an eviction before, and feel the seller isn't working hard enough towards this. By February he will be in a full foreclosure, and most likely will be asked to leave himself.

[Ann Bellamy]

@Franklin Romine , $500 as cash for keys won't cut it in MA.  Rents are high, courts are pro-tenant, and evictions can take years, especially when the owner doesn't live in the property.  So $500 in MA is probably laughable to the tenants.     I know an investor who offered 30K  (yes that's $30,000.00) and still couldn't get a previous owner out of the property.  Took him years.  He actually presented at my Black Diamond networking group on the situation, it was so bizarre.  

@Caleb Charles, I'm not your hard money lender in this circumstance, so I can't speak from their perspective.  And you appear to be a Dave Lindahl student from your use of the term "emerging markets".  Have you run this deal past your MA coach from the Lindahl program?  He should be cautioning you in this deal.  I'd ask for his perspective if I were you.

Assuming it is in MA, there is not much about this deal that is good for a beginning investor:

1.  If the seller were good at managing tenants, he probably wouldn't be facing foreclosure.  So since he doesn't have much motivation in this deal to get the tenants out for you, (Read:  he's not going to make any real money from this transaction)  assume that he won't.  You will therefore be stuck evicting two non-paying tenants in the most pro-tenant state in the union, bar the possible exception of California. 

2.  If the seller had enough money to pay rent, wouldn't he be paying the mortgage on the property?  Oh, wait, he doesn't have any income from the tenants.  Hmm.  He has very little money or he wouldn't be losing it to foreclosure.  I would be expecting that you would soon have to evict your third non-paying tenant, namely the seller.  By putting a rental agreement with the seller into effect, you are affording him all the protections of the Commonwealth of Massachusetts' very liberal Housing Court.  

3.  If you insist on going forward with the purchase, I would negotiate the heck out of the price to purchase, to compensate for the considerable loss you'll incur considering no rents, months and months of 3 evictions, while you pay taxes, insurance and hard money interest.  Not to mention repairs from vindictive tenants.   Sounds great, doesn't it?  

Sorry, Caleb Charles, I'd tread very carefully in this deal.