Options to complete rehab when nearly 100% occupied

[Aaron W.]

Hello all,

We are working on going under contract on a 40 unit multifamily property soon. The property is nearly 100% occupied with Section 8 tenants. The property has not been well taken care of and has a lot of deferred maintenance to the exterior and all interior units. 

If we are to close on the property, what options do we have to clear out the tenants so we can do a complete overhaul of the property? 

These are the current options we've thought about:

1. Wait out each tenants lease to expire then not renew so we can complete the rehab of individual units. Most likely scenario from what we see. We've built in a longer timeframe for rehab in our underwriting just in case this scenario happens.

2. Offer cash for keys to have the tenants move. Can be costly and the tenants still may not move.

3. Require the seller to provide us a vacant property so we can go right in and complete rehab. We can offer the seller a higher price to get this done.

4. Similar to #1: We decide on which tenants we want to keep and which ones we do not want to renew, update vacant units, and move the tenants we want to keep into the updated units, then update the moved tenants unit.

5. Similar to #2: We decide on which tenants we want to keep and which ones we do not, offer cash for keys, update vacant units, and move the tenants we want to keep into the updated units, then update the moved tenants unit.

How does Section 8 play into these plans? We are advised HUD did not allow a rent increase in the last year.

According to our agent and property manager, once we update the entire property, it will be able to attract higher paying tenants.

Look forward to seeing what additional options we have from the community.

Thank you in advance for all your help!  Have a great day!