Buying a property with tenants: Inheriting cashflow or problems?

[Zachary McDonough]

Stepping up my game to multifamily…

This 6 unit is rented in a decent area and has 5 rented and the owner occupying the 6th.

Here’s my objective. Buy the property with a conventional investment loan. Fix up the 6th unit and rent it closer to market rents. After different turnover, I’d like to do the same to the following units to raise the cashflow situation and commercially refi the property.

But as a new-ish landlord, what should I consider when inheriting tenants? Should I ditch them with cash for keys or celebrate that the property is already cash flowing?

Also, any tips when you purchasing a 6 unit built in 1973?

Thanks BP family!

[Alecia Loveless]

@Zachary McDonough Please be sure to know your market. There is a town about 45 minutes from me that was a mill town. The mill shut down and there were no jobs. The government built a federal prison which is now the largest employer. There are maybe 700 renters in this town of 1800.

All of a sudden with the market explosion all of the slum lords have put their apartment buildings, mostly large houses carved into 2-5 units on the market at prices that I find ridiculous for what you are getting.

Investors from the south and OOS have “discovered” the area and are buying the properties with the intention of BRRRRing them. The only problem is that the renters can not afford rent at even $200 more a month than what they pay the slum lords. These investors are going to buy high, invest $75-100,000 per building expecting $1400 a month rent only to find there is no one to rent from them.

If the locals had $1400 they would have moved long ago.

Sometimes inherited tenants are excellent tenants. I have 10 doors and 10 inherited tenants. Making great money with no problems.