Tenant problems... and I haven't closed on the house yet

Rehabbing, Fix and Flip, Rental Properties
1

I am in escrow on a 4-unit in Ohio. Just prior to making an offer, I found out the seller’s management company rented out one of the units for about 1/2 of the market rental rate. I presume it was because they knew it was on the market and they wanted to make a quick buck on the procurement fee. That being said, I negotiated the price of the building down enough to cover the below market rent.

All tenants were properly advised by the management company that the appraiser would need access to units to complete the appraisal. When it came time to enter that same tenants unit, she rudely refused entry without reason and closed the door. That evening, she called my real estate agent to apologize for her actions. She said it was because her apartment was messy. The cynic in me says she called back when the unauthorized cohabitant or contraband was gone. When I inspected the property a week earlier, I can attest to her “cluttered” living style.

She’s not my tenant yet, but she’s already a pain. I documented the incident, but when I gain possession of the property, I’m not sure if I can evict for violations that occurred prior to my ownership. I would love to get rid of her based on her actions and her rental rate. I close in one week. Any sage wisdom?

2

I always start fresh with the new tenants. I talk to each one in person; have them voluntarily sign new month to month leases; and explain that the lease MUST be followed. Then, when the first one challenges me (as they always do), I promptly evict them. When all the other tenants see the bad tenant’s belongings thrown out to the curb - THEY FINALLY UNDERSTAND THE NEW REALITY.

Good Luck,

Mike

3

You can void an pre-existing lease if the tenant voluntarily signs a M2M? How do you sell it to them?

4

Don’t worry. She will give you plenty of reasons to evict her. You don’t have to rely on what she did before you get the title.

Bad tenants is one of the reasons that you can purchase rentals for a good price. The seller can’t deal with them and thus, they must sell.

Just consider it business as usual to get a bad tenant or two and that it is part of your job to make them straighten up or get out.

I sure hope you are going to fire that management company.

5

I will definitely fire them. I have my own PM and she is amazing. The existing PM Co is very low budget and unprofessional. That was a shady stunt when they threw in a tenant at 1/3 the market rate.

6

Not that this always stops them, but I always add a line similar to this in all offers and LOI’s:

“Buyer to have final approval of all rental agreements, service contracts, or leases negotiated during escrow period. Tenant qualification will continue to meet those standards currently in place.”

Of course this only tends keep the honest sellers and PM’s honest.