First Property Tenant Potential Issue

[Wesley Jensen]

Hey Everyone,

I am buying my first rental property soon (closing 1/30) and have a strange predicament. The property is an upstairs downstairs duplex with a tenant in the top unit. The top unit was rehabbed prior to the tenant moving in (end of 2015) and the move in checklist says "new" for everything. I am doing an FHA loan and will be house hacking for the first year. The downstairs unit was recently rehabbed and is vacant. The current tenant pays under market rent ($875/month) and my realtor has said he thinks the downstairs should produce $1100/month. During my inspection I asked if it was possible to finish the attic into a master suite, making the unit 3 bed 2 bath and hopefully producing $1200-$1300 a month when I move out in a year. So I plan to rent the bottom unit and finish the attic and do some other improvement while I live upstairs.

So there is a little background and here is my potential problems. When I saw the house for a second time I noticed a leak under the sink, bucket full of water, warped bottom of cabinet and flooring around the sink. We showed the sellers realtor and he called the owner and they fixed it right away. I had asked that I purchase the property vacant, because 1) I want to live upstairs 2) not only the leak and damage, but the tenant has a dog which goes directly against the lease 3) unit producing under market rent 4) I was worried about dealing with an eviction giving the tenant 30 days to vacate which would be the end of February (not ideal to move in February in Connecticut). The owners said no to having the property vacant (they said they did not want the deal to fall through and have no rental income). Apparently they discussed this with the tenant and own a property nearby that she will be moving into Feb 1. Now I close Jan 30, so they will have to give me her security deposit and I will handle moving out checks and all. I have asked if she reported the leaky sink, or any other maintenance issues, and they refuse to answer because she is moving into their other property and want to keep good relations. 

Is it worth me assuming she didn't tell the owner (when I found it and told the sellers realtor it was fixed promptly), and keeping whatever it costs to fix the damages from the security deposit? Or just eat the cost and being happy its (almost) vacant?

This is my first post and I am very grateful for any advice or input! Thanks!

[Rob Orazi]

In NC sellers are not required to disclose anything about the condition of the home to buyers. This is a buyer beware state. Buyers spend alot of time on home inspections during due diligence. 

That being said it is a little chicken sh*t of the current owners not move their renter before you take possession making you be the bad guy for keeping security deposit especially since she is going back into one of their properties. I wonder if they charged her a second security deposit? Anyway security deposits are to repair damage caused by the tenant not to repair routine wear and tear items.  My thought is that if the worst thing you find is a leaky sink when you move in let go its not worth chasing. If there is more damage then hold that security deposit and use as applicable by the law. 

All that being said sometime between now and Jan 30 be sure to have a clear understanding of what security deposits are legally allowed to be charged and how to report that to the tenant... It is their money after all.