Buying a Rental: Tenant Occupancy Status

[Jewel B.]

Hello there,

I am currently in the process of acquiring my first property, a rental property. My goal (3 options in descending order) is to acquire a local 2-4 unit to house hack, a 2-4 unit outside my desired living area, or a SFR.

I'm looking first and foremost at properties needing TLC/fixer uppers/BRRRR eligible. 0. I want to get a deal to reduce cash outlay and increase cash flow 1. I want to force appreciation 2. I want to raise/charge a solid rent to increase cash flow and get with the times (for example, I spoke with one landlord who never raised his tenants rent in almost 3 decades...WAY below market rate, costing him 10s of thousands of dollars in lost earnings, not to mention he trashed the place) 3. For my own personal satisfaction, I would like updated properties to rent out, not old ugly ones (plus it will help when it's time to sell one day) ;)

Regardless, but especially in the case of properties with below average rent or that are outdated, I'm wondering what to make of these situations:

1. Unoccupied/vacant (seems ideal for fixer uppers/BRRRR)

2. Tenant occupied (one or more units) (seems more "hopeful" for an outdated property you want to fix up as they may leave when their existing lease ends) (also provides income towards the loan I believe)

3. Long term tenant occupied (seems very inconvenient/problematic for an outdated property you want to fix up)

All in all, I'm thinking that if I want to BRRRR, unoccupied is best, occupied is okay/has potential, and long term occupied is not good. I'm not sure what options are for eviction in PA and as of 6/16/2021, but I would like to avoid that (especially with long term tenants #guilt), first and foremost because I'll feel bad, but secondly because it sounds messy.

What occupancy status do YOU prefer for

A) Rentals in general

B) Updated rentals

C) Outdated rentals (you want to rehab/BRRRR)

Any other related comments or advice on this topic?

Do I just need to take a tough pill and consider units with long term tenants that would need to be evicted in order to BRRRR?

[Bill B.]

Don’t upgrade while they’re there. Let them stay and upgrade when they leave. Turnover is where all your expenses are. Having someone stay 2 extra years is probably worth more than a 10% rent increase. Imagine 10 turnovers in 10 years versus 1 or 2. Not to mention 2-4 weeks of vacancy times 10 turn overs.