Anyone have experience with tenant buyouts in SF?

Question

HI BP friends another question regarding tenants here....has anyone had an experience they'd like to share about negotiating with tenants (rather than evicting them) for a tenant buyout so they leave voluntarily? Would love to hear any stories. Thanks!

Dan Redmond · Answer

Hi Katrina,

Yeah, it was. We have owned the property for actually over 18 years and resided here. A good run for the buy and hold concept. We are about to find out just how well our little nest egg has done as we are going to put it on the market soon. We had another stressful situation over the holidays, a fire. We are of the age where we just do not want to go through the rebuilding process and so it is just time to move on and give others the opportunity to build their dream.

Dan Redmond · Answer

Yes I have some direct experience here in SF. This story will cover the extremes that a story of this kind may go to. Had to get two sets of tenants out for serious capital improvements issues, life and safety issues. The totality will give you a good idea of how things may go. While I am aware of both easier and harder (money wise) stories, I will stick to ours. Also this was nearly 10 years ago, during the downturn. Easier process then, rents were were cheaper and alternative apartments were much more available.

One set, a couple, who we got along we well enough, basically became a typical buyout situation. The buyout cost 28K for 2 tenants. Both sides still had attorneys.

The other set, actually a single tenant, sued 7 business days later, with the help of a tenant's rights organization, for 500K for wrongful eviction. Serious stress beginning. While we already had attorneys and rock solid insurance, it was still an ordeal. The suit went basically away, with relatively small pay outs, the tenant still extracted more money for the buyout.

Total cost for all the process, 105K. Beware.

Account Closed · Answer

I thought you only buy condos. Why are you doing tenant buyouts on condos?

Diane G. · Answer

Account Closed - does the owner want to keep the building as rentals, or is he/she ready to get rid of the property?  the answer to that will drive very diff stragegy...

Scott Cattaneo · Answer

@Diane

@Diane G. I work for a property management company in the Bay Area, and this particular building has lots of long standing tenants that the owner would like to turn over in order to achieve market rent. As the middle man, I am looking for the most judicial way to go about this with the tenant.

If done right, I think buyouts can be a win for everyone involved, but I would love some advice on how to initiate the process.

Diane G. · Answer

@Scott Cattaneo - what are you trying to buy the tenant out for?  I bought him out so that the building can condo convert....

Diane G. · Answer

@Scott Cattaneo  - is it worth it? depends on how you look at it...

Do I gain more than $61K once the tenant moves out? yes!! Did he do anything to earn that money? No, I dont think so..

Anyway, back to your question, I have always had very good relationship with this tenant to the point that we hang out a few times when I go to SF ....Still, the buyout negotiation completely drained the friendship...

If you dont consider you guys friends, I wont try this negotiaton myself... You will be better off getting a lawyer for that...

Jeff M Woo, Andy Zach are some of the good ones that I heard..

Scott Cattaneo · Answer

@Diane G. It will probably still be worth it! Thank you for sharing that. Does anyone have any tips on initial contact with the tenant? Perhaps some ideas of verbiage to put in a letter to the tenant without sounding too threatening?

Diane G. · Answer

Ok, I just did a buyout... Tenant is late 30s and has been there for 7 years... It is a 2/2 in Pac Height...

Tenant lost his roommate in April and could not afford to stay there by himself... instead of moving out, he paid $5k for someone to move in so that he could negotiate a buyout w me....

I ended up paying him $61K....Ugh...

Vinona Bhatia · Answer

Are you still interested in stories? - I have a simple one. My tenants make 5 times my income, and yet when I asked them if they were leaving at the end of their one year lease so I could move back into my house, they denied any intention of wanting to leave the house, the neighborhood or SF, and we settled with a buyout agreement that benefited them financially ($18K). After the buyout was signed one of them says he received an unexpected offer and the family will be moved to NYC for what I presume is an even higher paid job. Meanwhile I paid for an airbnb as I await for them to leave my house and they will have free transitional housing. So, i know there are greedy landlords out there but in this case it was the tenants who had all the greed.

Anyone have experience with tenant buyouts in SF?

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