Buying first duplex, inheriting tenants question.

[Phillip Austin]

Good day,

I am purchasing my first duplex. This will be my 4th and 5th units to my portfolio. I have been wanting to get into multifamily since the beginning, so I want to make sure that I do this correctly. I am excited about this but nervous that I will be inheriting tenants. The rent analysis says that the rents are on par with the area and the utilities are separated, except the water which the tenants pay a fee on. Outside of these things, when inheriting tenants on a multifamily purchase, are there any red flags or a specific checklist of items you try to make sure of before closing? 

Any and all advice is appreciated. Thank you!

[Frank Avallone II]

Hi @Phillip Austin, and congratulations on your previous portfolio along with this new purchase!

So far in my journey I have always inherited at least one tenant per property. Unfortunately, I have learned some things the hard way through my experience haha.

The first thing I would do is to ask for a copy of the lease in place and read it thoroughly. Second thing I do is to do what you already have done and checked the rental amount vs current market value. Third thing I do is ask for 12 (or 6 months) proof of payment from seller from the tenants you are inheriting. Next, if you ultimately would like to have them leave or find any red flags in the previous steps, then I would ask the seller to send a letter of non-renewal (Check state laws). 

Lastly, I would highly recommend having your attorney implement an estoppel agreement. This agreement basically verifies what the relationship between the current owner and tenant (rent amount, lease terms, protected tenancy status, verbal agreements made between the two, any changes to current lease made, and verification of utility payments and such).

Some other things to consider:

* Local rent control laws if rent was lower than you would like.

* Condition of the unit they are living in.

* Verify security deposit terms and amounts.

* Obtain any rental condition checklists that may have been made when tenant first moved in.

Hope this helps!