I looked at a property today that has potential. Maybe more potential as a property to be flipped rather than one that continues to be rented out. It is a two unit that needs a lot of work. So much
so that it would demand that tenants not be in the place while
it is being fixed up. The price is right and it would produce a good profit after it has been fixed up. What happens if I purchase the property? Does one continue to honor lease agreements or are they null and void when the property switches hands?
Most state laws require that you honor any leases in place. If the tenants are on a “month-to-month” you can give them the requisite notice (usually 30 days but in some states 60 days).
Keith
Ahhh two-units. What is your market when you go to sell it? Yep, for the most part, investors. I’m looking at these deals all the time. The problem ALWAYS is, too much dollars for the property. Smart investors have their price – solid tenants make that price more worthy.
Personally, I’d rather sell it fully rented – makes for a very attractive sale. “Newly renovated; both leased, with postive cash flow; two unit…” Or, you can go, “Why pay rent? Newly-renovated, two-unit building, suitable for owner on one side.” I see that a lot down here.
When are these leases up? Can you renovate with tenants in place?
Good luck to you.
Tami, yeah. That is why I posed the question about tenants current lease if I were to purchase the property. The unit downstairs is being rented out. The upstairs unit is not being rented out at this time but one of the downstair tenants (father, daughter, and grand-daughter) is thinking about taking the top unit for piece of mind. The property needs around $15K of work ± 25%. The property is selling for about 60% the pricetag of comparable properties.
I would sell to another investor and even at the price that I would ask, if both units were filled it would yield about a $150-$175 positive cash flow per month. Unfortunately it would be very difficult to downright impossible to renovate the property while it is inhabited.
The current tenant stays at home with his grand-daughter throughout the entire day. This tenant has been in the property for a month but I’m checking on the status of their current lease.
Maybe you could work out some type of arrangement with the tennants where you rehab the top unit, then move the tennants to the top unit temporarily while rehabbing the bottom unit. If a newly rehabbed unit isn’t incentive enough to agree, you could make some type of monetary persuasion, and help them move their necessities up and down stairs. Just a thought.