Wholesaling Tenant Occupied Property

[Lorraine Hernandez]

Real Estate Friends! I have a seller who wants to sell their property but is currently tenant occupied. Im trying to figure out a solution on how I can keep the tenants occupying the home, while my end buyer can make repairs on both the units for about 2 months to add value to the property and potentially raising rents. However, the family is currently going through job loss but are up to date with their rent payments. What would be the proper solution to this in order for a potential buyer to be attracted to this deal and inherit the tenants? This is a delicate situation and I want this to be as smooth as possible, having them vacate the property is a last resort option. 

[David Ramirez]

Hey @Lorraine Hernandez, 

Most of our deals are tenant-occupied when we enter into a contract. However, we negotiate a suitable timeframe with the seller for the tenants to vacate the property. We prefer not to wholesale properties with tenants due to the potential liability for the buyer and the significant reduction in our pool of buyers if the property is not vacant at closing. We include a clause in our contract stipulating that closing is contingent upon tenants vacating. 

The only scenario in which we would consider wholesaling a property with tenants is if the rent is already at market rate and our selling price meets or exceeds the 1% rule. Since we typically acquire properties that require at least cosmetic work and the tenants are paying below market value, it is always better to coordinate a reasonable timeframe with the seller for the tenants to leave. This allows our buyers to purchase the property, make the necessary improvements, and then choose to either rent it at market rate or sell it.

Selling a property without providing at least two exit strategies for the buyer significantly decreases our pool of buyers.

Feel free to reach out, you could send me the numbers and I can give you my opinion on what would be a good deal to a buyer with keeping the tenants.