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Updated over 8 years ago, 07/10/2016
Problem Tenant
BP community! I am negotiating a property which has a tenant that has failed to fail a single dime of rent for eight months to it's current owner and am working on how to get him out. (NOTE: tenant has expressed interest in buying from current Owner.) I need help from other landlords or property managers on what paperwork is required to notify him that I am the new owner.
My plan/intention is to notify tenant that I am the new owner and will provide him the following options:
1, He is being evicted and I will be seeking missed rent compensation from him through legal means.
2. Option to leave under terms that if he vacates in XX days, I will give him $XXXX, granted he leaves property in current condition and no additional damage
3. Sell property to him and give him XX to come up with money. (In doing this, my intention is to test his motivation and desire to buy, as well as give me time to look for backup cash buyer.)
All those experienced landlords and others that want to contribute, what do you think of this plan and what are some concerns I should have going this route??
Thanks in advance! -Rick C.
Why didn't the seller/owner get him out before this...if he didn't pay rent why would he pay to buy the place...my advice would be to RUN there is something going on here
I seriously doubt that someone who can't pay rent can afford to buy the place, that makes zero sense. How do you know that the current owner hasn't tried these options? I would check with the courthouse and see what's happened in court thus far with this home, and with this tenant.
@Rick Camacho I'm guessing the reason the current owner is selling has a lot to do with this problem tenant and the fact that he isn't paying rent. I'm sure you've also negotiated a discount on the sales price to account for the cost of dealing with this non-paying tenant. So I don't see an issue there.
My answer to your question though would depend on whether you're actually buying the property yourself or you plan to wholesale it. It wasn't clear to me which you were doing since you mention being the new owner but also mention that you'll be looking for a "backup cash buyer".
If you plan on taking ownership yourself, I would start working on getting this non-paying tenant out as soon as you take ownership. Don't wait. (You likely won't be able to get an award for "missed rent" though if you're referring to the rent that the tenant didn't pay to the seller since you weren't a party to that agreement at the time the rent wasn't paid.)
If you plan to wholesale the property to a cash buyer, the tenant will likely become the end buyer's problem and they'll have to deal with it since they'll be the actual new owner. So what they do would be up to them, but I would also expect them to want a similar discount to offset the cost of dealing with it.
In any event, I would not waste any time at all trying to sell the property to the current tenant. Like @Kimberly H. said, if he doesn't have the means to pay rent, he isn't going to buy the property from you and he'll likely just stall so he can continue to live rent-free.
@Kyle J. The current tenant was a friend to the owner's late husband. The late husband and friend made a verbal rental agreement (nothing documented) to stay in the property, and since his death, tenant stopped paying surviving wife. Owner is an out of state landlord and wants to get rid of the headache property and tenant. Property is paid off and I have gotten a steep discount on the property due to all the information above.
I plan on wholesaling the property, so based on the additional info, what would be your advice?
Consider this....get the property under contract with a bunch of contingencies so you can walk at little/no cost. 60 (or more) days to close so you have plenty of time. Offer the deadbeat cash for keys. If he takes it and leaves (and prop is in good shape) close the deal, it's yours. If not, consider eviction, see if you think it's worth the hassle. Selling the place to him seems like a bad idea. You would probably have to get current owner on board with this plan...I'm guessing they're motivated.
Originally posted by @Rick Camacho:
@Kyle J. The current tenant was a friend to the owner's late husband. The late husband and friend made a verbal rental agreement (nothing documented) to stay in the property, and since his death, tenant stopped paying surviving wife. Owner is an out of state landlord and wants to get rid of the headache property and tenant. Property is paid off and I have gotten a steep discount on the property due to all the information above.
I plan on wholesaling the property, so based on the additional info, what would be your advice?
Based on the additional info and your plan to wholesale the property, my advice would be to let your end buyer deal with it as they will be the one who actually takes ownership. The fact that you have agreed to buy the property from the current owner doesn't give you the authority to start an eviction proceeding against the tenant, and I definitely wouldn't advise doing any sort of cash-for-keys deal with someone else's tenant. Like I said before though, your end buyer is probably going to want a discount too in order to offset the cost of dealing with this non-paying tenant. But that's okay. I'm guessing that's why you negotiated a "steep discount".
Good luck and hope it works out for you.
Thank you everyone for your comments and advice!!
Originally posted by @Rick Camacho:
Thank you everyone for your comments and advice!!
I'll just add that any verbal agreement the tenant had with the late owner - is not valid. Any rental agreement for a year or longer must be in writing. So, this guy is just a month to month tenant. So, whoever inherits this guy just has to give him 30 days notice to vacate, and simultaneously give him notice to evict for nonpayment of rent. At least that's what I'd do.
If you are set on wholesaling this property, I'd work with the current owner and walk them through the eviction process before I had any sort of legal agreement with her. If there's no lease (depending on how tenant friendly your state is) it could take months to get the tenant out, maybe longer. Sounds like no one wants to deal with this tenant, and your buyer won't want to either- it severely impacts the value of the property.
- Corby Goade
@Rick Camacho my guess is you are getting a discount because she wants the headache gone. For that reason I doubt she wants to deal with eviction. If she wanted to deal with that, then why not evict and put the property on the MLS to get retail? People have said it many times before. Find value by helping others solve problems. Her problem is this loser friend of her dead husband is taking advantage of her. She wants the problem gone.
Getting rid of the guy is key to unlocking more value to the property when you resell. I would stop by and let him know you are not a push over and you don't take kindly to people who screw friends and take advantage of widows. Explain to him that he needs to leave on his own immediately or you will move to evict him. Continue to explain that with an eviction and judgement for 8 months back-rent on his record, his dreams of owning a home will never come true. Renting will be difficult with an eviction on his record, so it is in his best interest to leave now.
I am not saying to threaten him. Just lay out the situation and explain that you are just trying to help him from making a big mistake.
Option 2 is to wholesale with the trouble tenant there, but you will need to disclose the situation to the buyer, so expect to discount even more since they have to deal with the problem.
Maybe when the guy finds out the widow is out of the picture, he will just move along. He probably finds it easy to take advantage of a widow but will probably not be as lucky with you.
Thanks for your service to the country and good luck my friend!
@Account Closed Awesome advice, I'll put that in my book of knowledge! And serving this country is my pleasure!
#5 Wholesaling Contributor
- Real Estate Broker
- Naples, FL
Sounds like a problem waiting to get worse. I would have the current landlord proceed and get an eviction done. I would have serious reservations about putting it under contract and wanting to assign it with the current tenant in place. What if your buyer blames YOU over the tenant. You MAY win a lawsuit, but it could be a real headache. Unless you own the property, you probably have no legal grounds for an eviction. Put that on the current owner...let him deal with the headaches, and surrender a problem/tenant free property to you at closing.
Rick
Sounds like the below pertains to the current owner.
Almost everyone has heard about “the tenant from hell” who trashes the house and leaves owing six months’ worth of rents and fix-up costs in the thousands. Movies have been made about the subject to further dramatize it. There is no question this kind of thing does happen. However, it doesn’t have to happen to you, nor should it.
You will hear that deadbeat tenants know all the rules, which enable them to stay in your property month after month without paying any rent. Sometimes the storyteller will say this is so because the tenant has minor children and receives welfare or some other assistance.
This is giving far too much credit to the tenant for being street-savvy and knowledgeable. But, chances are the tenant’s success is much more likely attributable to a dumb landlord. Seldom will any tenant stay very long in my property if he or she doesn’t pay rents. After you’ve done a few evictions yourself and learned what papers to file in a timely manner, you’ll quickly build enough confidence so that horror stories won’t happen at your properties. Again, I’ll repeat, know-how is the difference between owners who operate their rental properties successfully and the ones who are simply hoping for the best.
Good luck
Fixer Jay DeCima
This is easy, offer cash for keys or hire an eviction attorney and get rid of him. Get him to state he has an oral lease in writing (letter, email or text) with dead husband, then evict him (oral leases are legal in Florida) plain and simple. If you've never evicted someone I would hire an attorney, typically landlord tenant attorneys are reasonable. If he is squatting and there is no tenancy then you'll have to do an ejectment and not an eviction. My understanding is this takes a little longer than an eviction but shouldnt be a problem for an experienced landlord/tenant attorney. I would definitely check the docket for any prior litigation regarding the tenant and the property. PM if you want a recommendation for an attorney.
Here in tenant friendly Los Angeles County, California, It takes my lawyer about 6-7 weeks from the time I decide to evict a tenant, until the sheriff shows up. I would start the process the day I took possession of the property. Then get a company to fix the place up when he is gone. I have tried fixing things myself to save $, but if it is anything beyond paint or patching drywall, it takes too long. Usually hard headed tenants like this (in my limited experience) somehow feel they are magically destined to stay in the place with rules that only apply to them that they dreamed up in their heads...so trying to negotiate or level with them, doesn't work. The lawyers I have used have cost around $800 - $1000 bucks for the entire process...Get a recommendation for a lawyer, get them on the case, then stick to your guns, and get that scofflaw outta there.
Does the lease have a clause that when it is sold the new owner can do what they want with the tenant within 60 days (cancel the lease)?
- Anthony Angotti
- (412) 254-3013
@Anthony Angotti Contract states that tenant must be out of property prior to closing. Did I just kick myself in the behind?!?
@Rick Camacho well that's good for you. Then for the seller to close the landlord has to end the lease.
They should be able to if their lease contains that clause. Alternatively it would be on the seller to evict/pay cash for keys.
Why do you think you'd be kicking yourself?
- Anthony Angotti
- (412) 254-3013