Seller Offering new tenants before closing

[Natalie Olivo]

My partners and I are currently looking at our first deal in the hudson valley area. The place is a two family home (3 bed room, 2 bath) currently generating $1000 per door with existing tenants. The problem is that these rents are below market value according to comps in the area. The seller believes (or claims) the place could generate $1400-1600 per door and is promising to fill the place with tenants before closing. Does any one else have experience with this kind of deal ? How do we structure this so that we guarantee what the seller is offering?

[Roy N.]

@Natalie Olivo

In scenarios such as yours, we always prefer to take the property as it ... and we will only pay for the current performance of the business, not the unrealized potential  - there is no reason to reward the vendor for the work you will do to improve the performance.

It would also be wary of the vendor offering to place new tenants at a substantially increased rent (40-60%) prior to close.  Ostensibly, s/he would be doing this to justify a higher valuation and may not be as discerning with tenant selection as you might desire.   the first question which should come to mind is: if the property can generate for 1400 - 1600/month, why is it only producing 1000?