Tenants in property

[Alida D.]

If you are a wholesaler do you find it difficult to assign your contract with tenants in the property on a year lease? If the person you assigned the contract to is intending on rehabbing or selling to an end buyer can he just kick the tenants out?

How does it work?

[Peter Giardini]

I have experienced both. Buying properties with tenants in place and vacant.

My preference as an investor is to purchase the property without tenants. My reasoning for this is based on my experiences.

Consider... in almost every case where a wholesaler is able to get a property at a low enough price, the owner most probably is a "tired landlord" and the tenants that will be inherited more then likely are not very well trained relative to paying rent on time... if at all.

My approach as an investor was to always seek a greater discount if I inherited the tenants.

Here is how the tenant thinks about this situation... they probably have been skating along maybe paying the rents and that is why the wholesaler got such a good deal... the landlord can't afford his/her management style.

So... the tenant knows that when a new owner comes along they will either have to start towing the line and pay rent or start to look for another place to live... but not before they manage to live in the property rent free for as long as their jurisdiction will allow them.

What is the solution?

As a wholesaler you could ask the seller to get the tenants out... but a yearly lease will kill that pretty quickly.

Or... you could go to the tenants and suggest that if they are willing to vacate the property and release the owner from the lease, you will pay them some amount of money for their troubles.

This is known as cash for keys.

In making this suggestion to the tenant also let them know that they can have their entire deposit back... no questions asked if they agree.

As regards the deposit... this is like giving away someone elses money... as the deposit should transfer to the buyer at closing.

I hope this helps?

Pete