Buying fully occupied duplex through FHA... advice?

Question

Hi BP,

Just a quick post to get some friendly advise on how to go about this situation..

I am closing on my first duplex on the 30th, (3 days), and there are tenants occupying both the top and bottom apartments. As you know, with a FHA loan, the residence must be owner occupied. The tenants leases don't expire until some time in summer.. July-August I think. I would rather live in the top because it rents for less and it would give my fiance and I the opportunity to fix it up a little and when we move out, possibly rent it for more.

Now my question is, How would you go about getting the tenants to move out possibly before their lease ends so you could move in? I could probably just wait for the lease to be up, but Id rather not take up space in my parents house for any longer than I have to.

thanks,

Joe

Bill S. · Answer

@Joseph Shevy you can buy them out. That is, pay them something that they agree to for the difficulty in moving.

You can ask them to move and give them the freedom to do so when they find a new place. Let them know the lease will not be renewed and offer for them to leave sooner if it works for them.

At a minimum you should give them written notice of non-renewal. Make sure you research your state laws so that you comply with all those requirements as there are some places with specific requirements.

Typically this is an issue handled with the contract. You make it a requirement of the seller. Something like, the top unit will be vacant upon closing.

On a side note, I hope waiting until the lease is up does not violate your FHA funding agreement. You should check with your lender on this as I believe that you have to occupy the property within so many days of closing. I had a friend that had the bank actually send someone out there to check and make sure they owner occupied.

Account Closed · Answer

I would start by just asking them if they will move. I've done that in the past, and they moved out with no problem. You might need to offer them $500 or so, cash for keys.

Account Closed · Answer

@Richard C.. I was just throwing out an amount that they might want to offer. It is not necessary that I know the terms of the lease, the tenants situation, etc. From my experience, $500 is a good starting point. They may very well say no, but it can't hurt to try.

I would start by not offering any money at all and see what happens.

Walter Bramhall · Answer

Don't you have to sign an affidavit at closing  stating that you will occupy the house within 30 days and for at least 12 months?

Be careful.

You could offer to buy out the renter you want to move.

When a renter moves, they incur expenses such as deposits to get utilities transferred, deposit on the new rental, ect.

Good luck with your 1st duplex

Account Closed · Answer

I agree with @Michelle L that you should start by just talking to the tenants, tell them you will be moving into the apartment and not renewing their lease, and wondered if they would be interested in moving now.

I'd offer to give them their full deposit back, first.  Offer to give them their full deposit back, which you'll give them as soon as they sign a mutual termination of lease agreement.

They may actually prefer to move now instead of in middle of summer.  And the hindrance for most tenants is coming up with deposit and moving money.  They may say yes, just for getting their deposit money up front.  If not, then I think I'd ask them what it would take.  Tenants often surprise you by asking for less than you would have offered.  Not always, but it's worth a try.

Congrats on your new place! Oh, and I would mention that moving into the upper apartment will also be a more pleasant living situation for you.  It's usually quieter being on the top floor, as you can't hear people stomping around above you.

Richard C. · Answer

OK, understood.  My concern was that your advice didn't seem to be a starting offer of $500, but rather saying $500 would do it.  And I think that may risk leading the OP astray on what might be required.

When I was renting, there was not a single year when I would have agreed to move 6 months prior to the end of the lease for $500.

Richard C. · Answer

I am legitimately curious.  How can you possibly know that "$500 or so" would do it, without knowing anything at all about the terms of the lease, the rent, the tenants' situation, or anything else?

Tenants have in some cases turned down tens of thousands, because of either advantageous lease terms or personal situations that made moving difficult.

Understand, I fully agree with your general advice that all that can be down is buy them out. I just don't that the amount required to do that is something we are in a position to judge with the information the OP gave us.

Michael Smith · Answer

@Joseph Shevy with an FHA loan you need to move in and occupy within 60 days of closing. With tenants in place, the lender will require a copy of the lease or an addendum as evidence that the tenant will be moving out and you will be able to move in within that 60 day window.

Buying fully occupied duplex through FHA... advice?

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