Scared tenants

I've seen this more than once -- I try to view a property that is bank owned and has tenants already in there ... and I can never get a showing. The tenants are always not at home, or the whole family is sick, or it's a bad time, etc.

I have a suspicion of what's really going on. The tenants know that the owner lost the home to foreclosure and now the bank owns it. If someone buys the home, they don't know what's going to happen.

What if the new owner doesn't want tenants and decides to kick them out?

What if they have pets and the new owner doesn't allow pets?

What if the rent is $700 and the new owner decides to make the rent $800 and they can't afford that?

Most importantly: what if they get kicked out?

I was viewing a property a couple weeks ago and the lady who lived in the house sort of had a surly attitude. (I would say "grumpy" but I prefer Josh's word "surly". He used it in my podcast and it has a nice sound to it.) Anyway, we were looking at the property and she made some comment about how I'll really like the house maybe if I wanted to repaint it or something. I said, "no, I'm not looking to live here myself, I'm looking to keep it as a rental." Suddenly, it was like a switch had been flipped and she was Ms. Sunshine. "Wow, that's great! Please buy this house!"

I don't think she really was a grumpy person by nature, just afraid.

I was just speaking with some tenants today (not mine) and they were really nervous they were going to get kicked out when someone bought the house. They really were relieved that they were getting to stay.

And I think that's the same thing about these other properties I'm trying to look at.

There are definitely positives and negatives to buying properties with established tenants:

The positives:

a) No marketing costs. You don't have to advertise the rental.

b) No vacancy. Start collecting rents day 1. (Rents should be pro-rated to you when you close.)

c) Sometimes you get long-term tenants who want to stay long term.

d) You fix things the previous owner didn't and now you're their hero.

The negatives:

a) There's a period where you really have to get to know the new tenants and put their mind at ease. You have to build a relationship with them. You have no idea what they were used to before and they don't know you. That takes a little while.

b) You didn't screen these tenants. You are trusting whomever put them there did a good job. And if the prior owner got foreclosed on, you have to wonder what type of job they actually did.

c) Sometimes you don't get a security deposit. You have no idea what the prior owner was thinking, and if they got foreclosed on, many times they run off with the security deposit.

If a property has existing tenants, I always want to meet them face to face to get a sense of what they are like before I buy.

If you've purchased properties with existing tenants, I'd like to hear your story as well!