Inheriting long term lease with NO safety deposit

[George Wendt]

I am looking at two duplexes.  The numbers work for me (2.7% rule), are in a part of a city that I like and are priced right.  There is one major issue.  The old landlord signed long term (5 year) leases that don't expire for two years.  The rent is below market but that doesn't both me much because the numbers still work fine.  

The part that concerns me is that there is no safety deposit.  0.  Additionally, the lease actually reads 500 dollars per annum when they clearly meant every month.  This doesn't scare me as much as I assume any court would see that this was a clerical error if there were ever an issue.  Lastly, the wholesaler won't send me the whole lease until I already have an accepted offer. 

The wholesaler is claiming the rent is under something called "lease-option" where there is no security deposit because of labor the tenant put into the property and is expected to handle all maintenance.  

The question I have is: should I even consider a home that has inherited tenants with 0 rental deposit?  I would be concerned about two things: 

1.  If the tenant trashes the property on the way out, I am kind of screwed. 

2.  Does the fact that the tenant was expected to make repairs themselves mean that I would be dealing with a bunch of shoddy work?  Would and inspection cover this?

Sorry for this being so long and I appreciate any and all advice.  

[Andrew Syrios]

Whenever you're inheriting a tenant, especially under the circumstances you describe, it's best to assume the worse. It can also make for a good negotiating point.