4-plex has potential tenants inheritance problems?

[Qingqing Gan]

Hello BPers,

One out of many great things I've learnt from reading bp posts and listing to podcasts is, to be cautious when coming to inheriting tenants from previous owner. This is something I need your help by analyzing a 4-plex I just reached mutual yesterday. 

1. The property is located in an improving class B-/C area. Managed by a PM company. units 1&2 have been occupied as $1295/m for 2 months. unit 3 in eviction process (close to the end). ads for unit 3 has been out for two weeks, and no potential tenants yet. unit 4 has touchup work going on for market ready soon. P&S agreement says all units need to be in leasing for $1295/m before closing.

2. based on comps, the leasing price is 5-10% higher than market price. (I am asking for help from local PM to confirm.) There is clear intention that seller raised the rents two months ago for a better sale price. Because of the eviction, I am concerned about the quality of tenants for unit 1&2 currently occupied.

 Options I have:

1. wait for the same PM to fill up unit 3&4 once tenant moves out, given eviction closes soon. 

2. take over the units and advertise the property and screen tenants on my own (or with help from my own PM). 

3. back off, because of too many red flags implying that we might end up with more evictions in the near future. Other than the tenants concern, overall, i am happy with this property.  

In any case, I am asking the seller/PM to show us tenants applications and screening they have done.  I understand that, being a landlord, eviction happens. Am I being over-cautious here? Thanks in advance!