What's your Process with inherited tenants?

[Dominic Sabre]

I'm new to investing and in escrow on a few MF properties.  Feeling nervous about taking over 10 tenants.

What's your process when you inherit tenants? 

Do you have them sign a new lease or just get the old one assigned? 

Do you run credit checks?

What else do you do when you inherit tenants at closing? 

When do you do step in your process?  Before closing, at closing, or after?  

Thank you!!

[Jennifer A.]

I do it a bit differently.

During the purchase process I have each tenant (and landlord) sign an estoppel letter which tells how much rent they are paying, amount of security deposit, when rent is due, occupants, pets, etc.  I actually use the one from the forms section at BiggerPockets.  Although in the future I will also request phone numbers and email addresses at this time as well.  So far I have had all verbal leases when I take over so no actual lease to obtain a copy.  This means they are all month to month tenants for me based upon our state law.

During that same time frame I'm getting information about whether or not those tenants are delinquent in any payments from the landlord.

I also run an informal background check by running the tenants and occupants through our online court system records.

When I take over as landlord, I issue a written letter the same day to all tenants giving them my contact information and confirming what I learned from the estoppel letters.  I also inform them about any work or inspections that will begin on the property.  Further, I give them notices about any rent changes and send them a written lease which I require to be returned to me signed by them by a certain date or I will consider that notice that they are moving out.  Of course you have to be very careful about state law and make sure you are giving enough notice for all these things.

I always do an inspection shortly after taking ownership.  Unless the previous owner did some kind of check-in procedure (which I've yet to see), it will be very difficult for me to withhold any money from their deposit because I don't know the condition of the property upon move in.  Of course, this doesn't apply in the cases of trash left behind or other obvious damage since I took ownership.

In my experience it can be somewhat painful to get a fully execute estoppel agreement that both the previous landlord and the tenant agree upon.  Of course that is why I do it.  I've had people claim deposits that don't exist.  I've had tenants claim pets that the previous landlord never knew about and certainly hadn't disclosed to me, etc.  This is an absolute MUST!