What To Do About Existing Tenants When Buying

Question

Good Evening To All,

My Fiancee and I are in the process of buying a two family as owner occupied.  We have to decide what to do about the current, long term, existing tenant.  We sign the P&S Monday provided tomorrows inspection goes as we expect and we have a closing date of on or before June 21.  I'm hoping to get some good advice here on BP

The property is a two family with three levels.  First floor is a 3 bedroom, currently unoccupied.  It needs paint, floors refinished and a little updating but nothing major.  Second floor is also 3 bedroom, needing about the same as first floor in regards to work.  This unit is occupied by long term TAW tenant who is paying $650 per month.  According to the listing agent she claims to be willing and able to go up to $1000 per month to stay.  That sounds good except current rents are more in the $1400 a month range.  More importantly we want the second floor tenant out so we can move into the second floor and combine it with the third floor level which is currently a walk up attic.  This third floor cannot be legally turned into a third unit per the city but it will give us two floors for our unit and the room to add a second bathroom as well as expand other rooms.

I'd REALLY like to have her out by the end of June so we could move into the second floor directly from our current residence but that is short notice.  We believe Massachusetts only requires a 30 notice for TAW but we're not sure.  We've also thought about offering her say $2000 to help assist her move provided she's out by the end of June.  If she's out and we can move directly to the second floor the plan is to quickly update and rent ready the first floor and have a new tenant in by August 1st then we can focus on our unit.

Any constructive advice is greatly appreciated!

Thanks!

Charlie MacPherson · Answer

@Jim Stanton  Here's what MA law states (paraphrasing): TAW in MA must be given notice of 3 months, unless the period between rent payments is shorter.  In the case of a monthly rent payment, you must give them one month's notice.  You must also give that notice before the next rental period begins.

So in your case, notify them before June 1 to have them out on July 1.

Your $2,000 cash for keys is a good idea, but you hand it over only after move-out is complete and you've done a walkthrough.

The issue you may have is that it's very unlikely that she'll find anything close to what she's paying now.  I just checked MLS and the least expensive thing I find in all of Plymouth County is a 371 sq ft, 1/1 in Plymouth for $850.  As I recall, it's a dump.

As far as Marshfield, there are 9 active rentals, but they're all summer/weekly rentals.

PS - when you do your walkthrough, take photos or video of anything that's been damaged since you first saw it, or anything that the seller as failed to do that they agreed to.  Have your attorney do a holdback of funds to remedy.

Good luck - and congrats on your duplex!

Jim Stanton · Answer

Thanks for the replies.  As I am also looking for a rental to fall back on incase we don't find a place to purchase before our moving deadline, it's crazy what the rents are all over the south shore and southeastern MA.

Unfortunately, the home inspection didn't go as well as we'd hoped and the house needs structural repairs.  I'm more than willing to undertake these as well as some other expensive repairs but as I'm estimating them to be in the $50,000 plus range I doubt the sellers will be willing to come down to our price considering all the offers they received.  I'm just glad I have the guy I have as his $650 just saved me a whole lot more!  We're still going to counter and see where it all goes but to be honest if I have to do and or contract out that much work I'm not going to do it to break even.  I have to get some sweat equity out of the deal as well

Thanks again for the suggestions!!!!

Theresa Harris · Answer

If you only need to do a bit of work to the first floor unit, why not offer it to her for market value?  This allows you to focus on getting the second floor unit in good shape.

Dan Smith · Answer

You should start by providing a 30 day notice to quit - you can find plenty of templates for a Massachusetts specific one online.  In MA they have either 30 days to move out, or the end of the following rental period, which in this case is a month.  Make sure that when you present the letter to the tenant you bring two copies.  One for her to sign (if you're hand delivering) that acknowledges the receipt of the letter, and one for her to keep a copy of.

Source: I'm a MA landlord and have gone through this process before.

Jim Stanton · Answer

Sorry. TAW is Tenant At Will so she doen't have a lease.

The Seller isn't willing to be involved at all with this tenant whatsoever.  In fact, the reason we got our offer accepted despite being $20,000 less than the highest was because we were second highest, $15,000 over asking AND we were willing to deal with the tenant.

Heath Ryans · Answer

@Jim Stanton

I'm not sure what TAW stands for, but, the most important thing here is, does she have a lease in place? if so, you have to honor that lease. if not, provide her with a notice to vacate in whatever amount of time is required by your state law. You can offer some moving assistance deal if you want. It could certainly make the process smoother. But don't just hand her the money before she moves out. Make sure she's gone before getting that check.

You could also have the seller issue that notice as part of the contract. IF the requirement is 30 days, and IF she doesn't have a long term lease in place, then if the seller issues the notice before the 1st of June, you could have her out by the first or second week of July if she doesn't put up a fight.

What To Do About Existing Tenants When Buying

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