how to evict an existing tenant - looking to purchase a 2 unit house

[Tenzing Jangtey]

Hi - Just joined BP.  Excited about learning from you.

We (my husband and I) have been living in Montclair, NJ in a two family house for the last 10 years.  We bought near the high, but tenant-wise we've had no problems.  We are considering purchasing more properties.  Currently we are looking at a 2 family short sale a few blocks away.  It has tenants on month by month.  Asking $335k, taxes about $10k.  Has two 2br, 1ba apartments.

1st floor- tenant not cooperating and not allowing showings.  Selling realtor says its really old and "needs work".  Tenant has lived there for 10+ years.  Her rental is way below market at $950, realtor says b/c landlord is not maintaining the property.  Market rate would be about $1600-$2,000 depending on condition. 

2nd floor is old and run down looking, but overall ok.  2nd floor has an enclosed porch that is supported on metal beams but looks like it needs to be totally fixed, peeling paint, torn screens, rotting floor boards.  Paying $1200...market rate around $1600-$2,000 also.

We would need to evict the 1st floor tenant to renovate it and get market price rentals.  Is it possible to evict a long-term tenant in NJ?  How long and expensive would the process be? 

This would be a buy and hold.

We're wafflers and have been scoping the market for many years.  We have a real hard time making any sort of decisions so your input would be a great help.  

Thanks for your help.  :)

[Craig Richardson]

In most instances such as this my advice would be to just walk away. A difficult tenant with undervalue rent and the reno needed in what can only be assumed to be even more work on #1 than is already apparent on #2 just has too many unknowns to consider it a stable investment. Without seeing the first unit (a 10+ year tenant who won't show it raises a lot of red flags for me personally) you really don't know what you're getting into. But if you're really interested, one option would be to do a little research or sit down with a contractor and get a rough idea of the cost to renovate #2 well (no band-aids), then double it and add in value for things that might need fixing in #1 that you didn't do in #2 (i.e. if you gut the #2 kitchen assume you'll have to do the same in #1). After you get all the estimated reno costs, figure out what price you'd need to buy it at to receive positive cash flow and subtract out the reno costs. Then low ball off that number. The seller will probably reject the offer (maybe even get offended) but at least you put it out there and who knows, with a difficult tenant he might have trouble selling and you might be getting a call from him a month or two from now, at which point you can leverage your position even more.

Also, what @Aly W. said is worth noting. If they're not on a lease you can just give ample notice and start raising the rent. Done the right way, they may just decide to leave, and if they don't, you have every right to evict them.

I guess what I'm trying to say is that it seems a little sketchy, but that doesn't mean don't pursue it. Just approach it cautiously, make a really low offer to build in wiggle room, and base decisions on a willingness to walk away if it doesn't seem to be working. At least it could be a good learning experience even if it doesn't amount to anything.

Just remember, there are actions you can take without making commitments, but there are no commitments that can be made without taking action!