Inheriting Terrible Leases

[Isaac Rayne]

Hello everyone! Today I went and saw a Triplex deal I wanted to run through my checklist and let me tell you the location this triplex was in is quite literally the best it gets for this type of C class Multi-family building. It was located in a gated community that is quite large and encompasses multiple different types of real estate from single families, to multi-families, to mansions. The amenities were also very nice including a country club, 2 golf courses and a lake. The listing price of this Triplex was $219,000 so it was quite a cheap deal with a rental income of $2550. So at face value it sounds like a great property (it actually is lol..) I comp'd out the area aswell and the other multi-family properties were charging around $1100-1200/unit while this one was around $900. So my first plan was to send a letter of intent and put an offer on it but unfortunately after doing a little more due diligence with my agent we figured out the landlord was covering all utilities for the tenants. So that alone literally killed any sort of cashflow this property would generate; infact it put it in the negative. So I didn't think it would be that bad, I'd just take it over and wait for the leases to end in a month or so and create a new lease agreement with the tenants or get entirely new ones. But here's the catch.. The current leases don't end till Nov. 30th. I love long leases but this current landlord is not only charging $200-300 less than market rent but he's also paying all the utilities... If I wanted to buy this property I wouldn't have any grounds for eviction and I would be stuck with these leases for another 9 months losing money every month which I could afford but I'm not sure if it's worth it. If I bought this property and up'd the rent and renegotiated that the utilities are paid by the tenants then this property would not only be in a great location but also around 20% COC which is FANTASTIC! Do you guy's have any advice or have you ever ran into something like this?