Multifamily Homes Already Rented Out

[Aaron Lathan]

Thanks in advance if you make it all the way through!

I'm new to real estate investing.  I recently moved from San Antonio to Houston and have successfully rented my first home (using a property manager YAY!)  I'm looking into Multifamily homes both in Houston and in Baton Rouge and several 3-unit & 4-unit homes in desirable areas that I believe would do well and my initial calculations "showed" a great return; state that they're already "fully rented" at a set rate.  

Since the tenants already have a lease with the current owner, is there anything special I need to do to get them re-leased through a property manager of my choice and have their payments routed to me?

Can I change the lease rates if they're a little low for the area?

Many of realtor dot com homes also say "don't disturb tenant"

How do I know the property is not a complete dump?  I don't have the money for major repairs but most of the homes seem to not show the interior.  

I appreciate any advice.

[Kelly N.]

Hello Aaron,

We just bought our third occupied multiplex, so now have 10 units total.  You will have to honor the existing leases (unless there is a clause in them stating otherwise), so you will want a copy of those prior to making an offer or once your offer has been accepted.  Study them closely, you never know what you might find.  We had one tenant who was supposed to be paying $500/ month buy had prepaid his rent at the rate of $430/month, which we did not discover until we got the leases.  We received the prorated amount for the time from when we took possession, but our offer had been based on the higher rent.

So far it has worked out well for us, but we almost always have seen every apartment before making an offer.  One tenant refused access on 1 occasion and the key was missing on the second try (likely a realtor trying to make sure there was less competition), but we made an offer based on the other two units.

Some areas have mandatory rental inspections, so I would check to make sure the property is current.  There should be an inspection clause in your offer giving you time to hire a reputable company to go inspect the property for you, and they should have access to everything at this point.  If they find anything that needs to be fixed, you can negotiate to lower the price or have the seller fix it, or you could walk away at that point if you can't come to an agreement.  You'd lose the cost of the inspection, any money you have paid to obtain financing, and possibly your earnest money, but that might be a lot better than buying a dump!

Good luck,

Kelly