Tenant Occupied Deal - Names on Leases don't appear to be Tenants

[Chris Lynn]

I've purchased, renovated, and leased 5 previously owner occupied single family homes over the past few years.  As a local, I've been ahead of the out of state money in terms of neighborhoods I've invested in, but the out-of-towners have finally found my spots.  So I'm trying another area that's sketch, but has money flowing in to the East and West of the neighborhood.  I have contract on a leased up duplex that is billed as having long term tenants from 2009 and 2011.  I have copies of the original leases with the names of the tenants.  They rolled MTM at the end of the one year leases and are MTM now.  Some online detective work indicates that the folks on the leases (both units) live somewhere else and different people live in the units now.  So it appears that I'm buying a duplex with effectively squatters that pay rent?  My other properties are a higher class, so this is not something I've encountered before.  To give you an idea of the area, it's a mid $30's purchase price and combined rents are $552.

My plan was to leave well enough alone and just collect rents for a year or so.  As others start to renovate around me, I'd move one side out at a time to follow suit, pushing combined rents up to the $800 to $1000 range.  I guess if these folks aren't even on a lease, they don't have much of a position to defend when the time comes to turn the unit.  Anyone have any experience with inheriting tenants that aren't technically tenants?

[Jeff Willis]

Well, yes, they are technically tenants. You are taking money (rent) from them for occupancy. Even if they are not on the formal agreement, you have created an agreement by your actions and performance. Since they are MTM, they have the same rights and any MTM tenant as to notice, etc. The best thing you can do is approach them with a MTM agreement and have them sign it. If they refuse, then you can take appropriate action.