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Renting red flags to look for????
Newbie here. When looking at investment properties and there is all ready a tenant in the property, what should I check for as far as the tenant goes? Rental history..maybe past rental receipts. Also, if there is a tenant all ready occupying the premises, why is the owner/investor selling? Is this a red flag?
Welcome to Bigger Pockets!
If you use the "Search BiggerPockets" box at the top of the page, you will be able to quickly find this topic in previous discussions that will answer your question.... just type "red flags".
Also, most basic landlording books will have a tenant screening chapter which will outline red flags. The key is to have good rental criteria established and to screen using that rental criteria.
Your question is specific to buying a property that already has tenants in place. This is a bit different. Some investors prefer to buy a property that is empty, others don't mind working with existing tenants.
I'm of the latter sort. I don't care if the unit is vacant or tenanted. If the tenant is a problem tenant for the current landlord, then I have a better bargaining position because I can usually get a discounted price for solving their problem by buying the property. Once the property is off their hands and into mine, I act swiftly to get everything in line and either save the tenancies or encourage undesirable tenants to move. I've rarely had to evict, but if I do... I know how to do so efficiently.
It's important when buying property with tenants in place, to meet and greet the tenants as soon as you become the new owner, introduce them to your management style, and get them onto your rental agreement as soon as you can. Be aware that this is their home and they may be on guard or fear you as the new owner. Try to win them over. Be respectful and polite.
People sell properties for many reasons.... just ask. When touring the property, use your scoping skills to observe how well the current owner has maintained the property and how well the tenants take care of their units. Ask the selling agent for disclosures about the condition of the property. Do your due diligence and arrange for a proper inspection of the property. Make your offer contingent on inspection. Ask to see the current tenant files, leases and rent register. Don't worry if the documentation is not available, as you can always find out what you need to know in other ways. Everything is negotiable... negative items become something to bargain against.
P.S. You posted your question in the Renters Discussion forum, which isn't the right place. This is the forum for tenants with questions about their tenancy or problems with their landlord. I usually don't respond to posts from investors who post in this forum. Please look at the BP forum descriptions and find the best forum for your future questions. :-)
Thank you Marcia for the thorough and detailed explanation! I see why I haven't been getting any responses to my post, as I have posted in the wrong area. I will look at the previous posts to gauge an answer. Also looking forward to listening to your podcast! I am a newbie so I have started with podcast number 1 and am working my way up. I am on 18 now!
As far as the property goes, I discovered that the owner is behind on their property taxes. You mentioned how if the tenant was an issue that it would allow you to be in a better bargaining position. I will definitely use this to my advantage in my future quests! Do you have any #1 books that will guide me in the correct direction for landlord legalities and information. I have recently purchased the ABC's of Real Estate Investing, as I heard many mention it on the podcasts of BP.
@Joddie Mcclain That ABC book by McElroy is a good one. For legalities, you'll want to check with what's available from your state and local organizations. Understanding the landlord-tenant laws for your jurisdiction is paramount. Establishing a good rental agreement is key. Having the moxie to enforce the terms of the rental agreement when tenants break rules is essential.
Good luck!
@Marcia Maynard Thank you!!
I'd want to know if the tenant is on a year lease and when that lease expires, or if they are on a month to month agreement. With M2M, you can just give them 30 days (depending on the local rules) notice to vacate, if they don't pay the rent on time or violate any other terms of the existing contract.
Next, it's important to know if they are under some type of rent control or Section 8. It's harder to evict tenants in those situations.
I'd rather be in a position to evict tenants if they turn out to be problems, right away. That way, you don't have to rely on the seller's reference as far as what kind of tenants they are - which you may not be able to rely on.
@Account Closed Thank you for the feedback. I've never thought about the rent tenant situation in that perspective in regards to a month to month lease.
That provides another alternative. Thank you.