• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Buying building, get tenants out?

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

sandao

Junior Member
I am considering buying a 4plex in California. I will not be living there.The current tenants are month to month, however the rents they pay are way below market.

Each of the four currently pays $1000. Going rate on that street is $1525 for a 2bd2ba (this bldg has 2bd 1.5ba only).

I could never make the pmt at $4000/mo income, I am planning to raise rents at $1300 each.
My real estate agent is suggesting a 62 day escrow, giving 60 day notice to the renters so at the end of escrow everything will be vacated and I will start fresh.

That prospect is kind of scary...besides having all units empty for at least 1 month, I will have to incur paint and carpet cleaning on all 4 units...my questions:

1. Is there any way to write a contingency to have the current owner raise rents effetive before close of escrow? That's a lot, from $1000 to $1300 (30%...)

2. How can I make a deal and give tenants a choice; 60 day notice of increase vs 60 day notice to vacate? Is this legal?

Your expert help is appreciated,
sandao
 


Alaska landlord

Senior Member
I could never make the pmt at $4000/mo income,
If you can't afford to make the 4000/mo. payment then you can't afford to buy.

You cannot be totally dependent on your tenants for your survival. Look for something that you can afford even when you don't have any tenants and make sure you have a reserve account for unexpected repairs.
 

sandao

Junior Member
Alaska,
Thanks for your input. It's not always easy to afford things in Southern California.
If I can bring rents closer to market price, making the difference from $4000 to $5200 mo income before closing escrow, I think it's worth a try. If there was no way to increase income up from $4000 then I wouldn't buy it.
So, #1. or #2. or do you have any other ideas?
Thanks,
sandao
 

xylene

Senior Member
Alaska,
Thanks for your input. It's not always easy to afford things in Southern California.
If I can bring rents closer to market price, making the difference from $4000 to $5200 mo income before closing escrow, I think it's worth a try. If there was no way to increase income up from $4000 then I wouldn't buy it.
So, #1. or #2. or do you have any other ideas?
Thanks,
sandao
Building is for sale for about 650 K...

That is a stupid buy.
 

tranquility

Senior Member
Having the rent being raised in escrow doesn't help you with month to month tenants. If you think about it for a moment, you can see why. The traditional way would be to get the property and give out the 60 day notice to increase rent, and if they don't pay, evict. Make sure you are not in a rent control area.

While I don't think only one who can swing income property without any tenants is a good definition of being able to "afford" that income property, if the difference between $4,000 and $5,200 for a month or two is key to the deal, you can't afford it. Tenants leave all the time for myriad reasons. Lose one tenant for a single month and you have already exceeded the amount you have determined makes the purchase a viable try.

Only those who take risk will earn a good return on their investment. However, this amount of risk puts you on the path to BK before you know what is happening.
 

CA LL

Senior Member
First off, what CITY is this in (to rule out any local rent/eviction controls).

Next...a property should be purchased based on ACTUAL not "projected" numbers working.

There are likely reasons why the current tenants are paying lower than market..their units may be in horrible condition, there may be extensive deferred maintenance both in the units AND the building overall, etc.

BOTH of your ideas are not recommended.

Is this your first purchase? How well do you know CA LL/Tenant laws? How about any applicable LOCAL LL/Tenant laws?

Did you know that if you give a 30% increase and mail it you must do so at least 65 days before it is effective?

It is STRONGLY not advised to raise the rents until:

1) You have new MTM agreements signed with YOU which you can do with 30 day change of term notices for them to sign the new agreements..DO NOT RAISE THE RENT at that time..just get new agreements signed with similar/existing terms...

2) USE FORMS approved by/created by CA legal firm who represent LL's in local courts all the time...

3) Evaluate each tenant's history, the condition of the building AND each unit and THEN raise the rents or terminate tenancies in order or priority based on your assessment.
 

Alaska landlord

Senior Member
You have to be able to cope with the deferred maintenance and the unexpected disasters. It does not appear you have the funds to be able to replace a roof or whatever heating system the 4plex has. What if a sewage pipe where to burst somewhere on the property
and you had to fix it fast or be shut down?

Buy something you can afford even when the market for renters is lean. What will you do if two of your renters take off on you?

In the last 2 weeks I have lost 4 renters one as recent as today. If my ability to pay the mortgage were completely dependent on my having all my units filled I would be up the creek.
 

sandao

Junior Member
Yes, this will be my first purchase. I have been looking at properties for quite some time, this one looks like a good one to me -- I have seen a lot of dumps asking outragoeus amounts.

It was built in 1981 (la Habra), has a 1yr old roof, 3yr old driveway and 1yr old paint job. Plumbing seems to be original, I haven't seen the inside yet, but it looks super on the outside.

I like the architecture plan, all townhouse style, 2bd 1.5 ba, laundry room, quiet residential street with a mix of condos and single family homes. Owner seems to be motivated to move out of state.

This is all in the preliminary stage, I haven't put in an offer yet. I am not an impulsive person, I am carefully weighing all options. I have the resources and am prepared for any unforseen future expenses. But considering the going rents on the same street are over $500 more, I want to bring these up to market as soon as possible.

Where can I get more info on LL/tenant Laws?

Much appreciated,

sandao
 

HomeGuru

Senior Member
Yes, this will be my first purchase. I have been looking at properties for quite some time, this one looks like a good one to me -- I have seen a lot of dumps asking outragoeus amounts.

It was built in 1981 (la Habra), has a 1yr old roof, 3yr old driveway and 1yr old paint job. Plumbing seems to be original, I haven't seen the inside yet, but it looks super on the outside.

I like the architecture plan, all townhouse style, 2bd 1.5 ba, laundry room, quiet residential street with a mix of condos and single family homes. Owner seems to be motivated to move out of state.

This is all in the preliminary stage, I haven't put in an offer yet. I am not an impulsive person, I am carefully weighing all options. I have the resources and am prepared for any unforseen future expenses. But considering the going rents on the same street are over $500 more, I want to bring these up to market as soon as possible.

Where can I get more info on LL/tenant Laws?

Much appreciated,

sandao
**A: judging from your posts, you have no idea what you are geting into.
 

sandao

Junior Member
HomeGuru,
Yes, I am new at this, and have come to this forum hoping to learn. We all have to start somewhere. I appreciate all who can offer useful information. If you are as your name suggests, I would appreciate your help and expertise also.
sandao
 

HomeGuru

Senior Member
HomeGuru,
Yes, I am new at this, and have come to this forum hoping to learn. We all have to start somewhere. I appreciate all who can offer useful information. If you are as your name suggests, I would appreciate your help and expertise also.
sandao
**A: ok, here you go. Contact the following for consultation and specific advice:

Realtor
Real estate attorney
Engineer
Home Inspector
Pest Inspector
Environmental consultant
Surveyor
Escrow/Titlte company
Mortgage Broker

That's a start. Good luck to you.
 

sandao

Junior Member
So far I have:

Realtor
Home Inspector
Pest Inspector
Escrow/Titlte company
Mortgage Broker


Can you advise on the need of

Engineer?
Environmental consultant?
Surveyor?

Do I need a Real estate attorney to close a sale?
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top