Interested in buying a duplex

Hello my friends,

I’ve been a lurker here for some time and decided to get serious about purchasing a cheap deal I found. The duplex is all rented out so I’m not sure about the procedures for due diligence that is available to me. For instance, how do I know the current owner of the duplex is not bailing because of horrible tenants he can’t get rid off. I also want to know how you go about inspecting the property when the tenant is already in it. Thank you for your advice.

You should still be able to get inside to take a look around. I’ve toured plenty of occupied properties. If it is listed with a Realtor, then your Realtor should be able to get you in there. If it isn’t listed, get the owner to get you in there. You may have to wait until the tenants are home before you can enter, but if you’re being told you can’t get in at all - that’s a red flag.
You should also be able to check public records to determine the property tax. You should be able to call insurance companies to get estimates for coverage. The owner should be able to provide utility bills (if they pay any of the utilities).
You need to see how the utilities are split. On many smaller buildings, utilities may be all off a common meter.
We have a 6-unit building that has individual electric meters (no natural gas at all in the building) and only one water meter so we pay water/sewer there. We also provide a trash dumpster, but the dumpster and the water bills are not expensive. I would not want to pay someone’s electric though because they can crank the heat and A/C and make it very expensive on you since they won’t care how much they use.

Bottom line is you NEED to get inside this place if you’re serious about it. Don’t go off the outside condition alone. If you can’t get inside, that’s a problem. Take what the tenants say with a grain of salt. Many will complain about the LL who won’t fix anything. That may be part of the problem, but they might be the other part.

Unless there is rent control, or the property is in New Jersey, you should be able to get rid of bad tenants. If there are bad tenants, you budget for several months without rent and get the price down to reflect the extra hassle of dealing with loser tenants.

Properties with bad tenants can be an excellent purchase, as long as you don’t go into it blind.

You can always make your offer contingent upon receiving the property vacant at close of escrow. Then you can choose your own tenants. Myself, I prefer to go by and talk to the tenants, and keep them unless they are realpigs or nut cases.

Even with rent control and in New Jersey, you can get rid of non-paying tenants and criminals (with proof). But bad pay is not the only reason you might wish to get rid of tenants.