buying multi family with no leases

[Joe Seegers]

as anybody came across buying a 8 unit where they listed rents and then i asked for leases they say they do not have any.they have a big property management company managing it.i have not come across this every in buying more then 50 properties. i am thinking going ahead with offer ,but redo my offer and lower it.they were asking 369,000.offered 288,000 and they took it.now am thinking they are trying to hide something.just let me know it somebody as had this happen to them.

[Account Closed]

With such a discount in price, it makes me wonder what kind of discounts they give the current tenants. A big property management company should have the leases, otherwise, how do they still stay protected? I would lower your offer and write in the purchase and sales agreement under the special stipulations to interview (3) of the current tenants to see if you can get some further information. I suppose you could just go knock their doors and find out that way. I think that is very strange that there would not be leases on 8 units.

[Thomas S.]

All you need is the esstopal letter from each tenant to confirm the major facts. No lease just means they are all on M2M verbal leases. You can non renew any or all as you choose.

[Tim Lindstrom]

I haven't done any multi-family deals yet, so my comments might not carry any weight...  

Do you have the rent rolls?  If those look good, and the numbers make sense,  I'd go ahead with the purchase.  I'd love to buy a property with no leases.  That gives you the opportunity to vet all the tenants, and give notice to the ones you don't want to keep,  while signing leases with those that pass your screening criteria.

[Fred Heller]

My experience is that it's not that uncommon for the paperwork to be lacking when dealing with smaller apartment buildings owned by "mom and pop" landlords.  Many times the original leases were signed years ago and the landlord never asked for a new lease or extension. This almost always means that the rent hasn't been increased in years as well.

The best way to protect yourself is to get an estoppel from each tenant. This is a written affidavit from the tenant which states what they believe to be the terms of their tenancy. This will eliminate any of those "the old landlord and I had an agreement......" conversations.

The plus side of not having a lease is that you don't have a lease. You'll be able to go in and make any changes you wish with the appropriate notice.

[Joe Seegers]

thanks fred  ,with the idea with getting a estoppel from each tenant