Buying a tenanted property?

Question

I'm considering buying a property with existing tenants. The property is a duplex.

How do I verify that the tenants pay on time and are not in arrears or subject to eviction proceedings? Is there a set methods I can double check the information?

Victoria O'Hare · Answer

If the property was being managed by a property management company, ask for the payment records for the tenant due their rental history. If not managed by property management the sell needs to get a copy of rent receipts for the last 12 months or time of occupency. Don't be afraid to ask for any and all information you need to make you feel comfortable with the deal. Happy Investing! Remember Action Cures Fear!

Peter Giardini · Answer

Make sure the review the leases and also, I would request that you have a chance to speak with the tenants as part of your due dilgence. Many tenants will make wild claims regarding what the landlord promised them, but that will be meaningless to you unless it is in their file in writing. In my experience the better the deal looked from a financial point of view the worse the tenants looked. Best of luck!

Tom C · Answer

B/C area? Most likely you will not get bank statements. If it's anything like most of my rentals, they always pay in cash. You can ask to see receipts though. My tenants even the ones on the bottom of the food chain, always asks for a receipt, in most cases just to take it back to welfare. You need to find out the duration of the current leases. Hopefully he was smart enough to put them on month to month. Also, don't forget he will owe you security deposits. You need their personal info so you can run your own background checks. Making sure you don't have a sex offender or a major felon. As far as the figures, all you can do is calculated your cost based off what the leases say they pay in rent and then figure in your cost. It's either going to be a winner or loser. Hopefully there are no common areas and you are not responsible for any utilities. If you inherit a bad tenant and find out about it later, all you can do is get rid of them very quickly after closing. The scary part is waiting to get them off his lease and on to yours.

Karim Shah · Answer

Hi Guys, Thanks for the replies! During my DD I did obtain the following: - App Forms - Lease Agreements - Rent Rolls (Rent Statement) I have asked for proof that the rent payments have been made. I then received a typed rent statement. So I have not been able to receive actual proof of rent payments (e.g. a bank statement). I also have a feeling that the owner is not looking to provide a copy of his bank statements. My primary concern is whether the figures are accurate. The last thing I want to do is buy a property with problem tenants. Especially, as the neighbourhood is a B/C area. Is there any other way I can protect myself, such as a obtain a undertaking, etc?

Tom C · Answer

I bought a duplex last summer that came with tenants. The first thing I asked for were current rent rolls, apps and lease agreements. Luckily, all of their lease agreements had expired. After I purchased the place, the tenants had to fill out my application, go through my background check and then sign my month to month lease agreements. It took several months to retrain these tenants and I am still working on it. They were used to having a nonexistent landlord and a neighbor lady next door who was supposedly managing the property, but actually caused more problems and drama then anything else. After many discussions with the tenants and neighbors, I got the place in order, but it took a lot of work and a lot of time. Every time I got a complaint from a neighbor, I pulled the tenant out in the front yard, in front of the whole neighborhood and chewed their ass. They learned that I wasn't going to put up with any crap or drama. I made it clear that it was my house and they would abide by my rules or they would be leaving. One other thing they learned was that if they had a problem, they could actually call or text me at any time and I would solve the problem right away. Not days or weeks later like the previous landlord. I wasn't happy about taking on someone's else tenants, but they pay on time and with a lot of patience, a big stick and a lot of shock an awe, things finally have turned around. For now!