Decent enough Deal Needs Serious Rehab -- but it's Fully Rented?

[Alvin Sylvain]

OK, memory hearkens back to yesteryear when my wife and I were investigating a triplex up in Central California. As I recall, they wanted $165K for it, it already had cash-flow at that price with current renters, but it was in serious need of rehab. We ended up passing on the deal.

It was a dump. All three units required serious work. The seller was desperate, ready to carry financing. Ultimately, it ended up selling for $145K. Fixed up, it would probably be worth nearly twice that.

OK, I'm fairly certain I made a big mistake passing on this deal. I don't need anybody to tell me how stupid I was, my own boot-prints are already embedded in my hind-side.

But what I'd like to know from the community is this: what do you do with tenants who, for all intents and purposes, are perfectly happy with the dump being a dump? We would possibly need for them to be out for at least a month, maybe longer, during the process. Ask them to move in with Uncle Harry? Evict them? Or just suck it up for however long it takes for them to move out on their own? Hard to get good Refinancing while it's still a dump.

Guaranteed they couldn't afford a motel for a month, and neither can I, and I find the idea of evicting people just to tear down the place and build it back up again to be distasteful to say the least. Aggravated by the fact that, if somehow we could rehab with the tenants still in place, after the fix-up the market rent would be like 50% more than what they were paying. Oh yah, that'll go over real well. Might as well put on my black top-hat and twirl my mustache.

So it's too late for this deal. What about the next time?