How to negotiate long undesirable lease on apartment purchase

[Terrence Williams]

I am currently looking at putting in a offer on a apartment building.  The dilemma I have is that the property management company is renting one of the lower units to conduct business.  This company is also the company listing the pocket listing.  He is currently paying about half of what the market rent is. Maybe even a little more.  He has been the property manager for the building for about 10 years.  He sais he has 3 more years on the lease with a 10 year option to extend.  My thoughts where that the discount was in exchange for managing the building but he said that is not the case. This will be my first bigger apartment building with retail space.  I want to put a offer on the property but not with him having the rent at half market price and having the option to extend.  Does anyone know what can be done to get him out if I purchase or what I can do to make the adjustment in the rent even thought he supposedly has a valid lease with 3 more years.  I think property owner and manager are working together to get him a lower rent after purchase or there is some kind of compensation for the management side that is not being disclosed.  Thanks in advance for any feedback.

[Hadar Orkibi]

it’s tricky having him locked in there for 3 years.

It depends on how good is the deal for you to consider if it’s worth pursuing.

What’s the upside? And cash on cash returns?

Considering he is also the manager it’s somewhat tricky, 

You should first vet him as a PM and make sure you can change pm if required.

Work the numbers on actual rent, including his lower one.

Are all other rents at Market? 

Talk to the tenants for some feedback about him!