Should You Buy a Tenant Occupied Property?

Yeah, my question had to do with tenanted versus non tenanted properties. And this question is coming from a place of, with the government prohibiting evictions. If you will, what are your thoughts on purchasing a, like a tenanted property? Is it better to go to a property that is intended to, so then you can do a more, I suppose, thorough background check on income and things like that.

I’ll give you my thoughts, but everybody has different thoughts on it. If you have section eight and non section eight type of property, so that’s a class C or worse or B or better, I’d say it’s two different answers. So maybe I’ll break down the section eight on first on a lower class property, I would always recommend having section eight with it, guaranteed rent that clientele under 800, eight 50 a month rent, which I never recommend.

Yeah. I still see you guys looking at pieces of crap properties for $60,000. Stop doing that, please. These guys, they don’t have any money. They don’t have 500 bucks in their checking account. You need the government to be paying, hang their rent for you. And I think you’re pretty solid in terms of the government’s always going to be paying that, that program stock going to be going away.

I mean, a lot of the stimulus money is going to bolster those reserves that said if I were to be buying that lower class property, I would want a in place only problem with section eight there. I think they’re better tenants too. Because they want to stay on that coupon program. They don’t want to get kicked off and they’re screwed.

The only problem is like getting the people in there. Cause it’s a little bit more stringent regulations. So I’m getting them in there. I don’t know, I’m not a property manager. I’m a passive investor, but like things like the baseboards on the walls need to be a certain height. So the rats don’t get it like silly things like that.

Your product and your property managers should know all these. And when you interview them, you should check the box. Yeah. If that’s section eight, I know, I know the depths, the inspector comes in and inspects the house for these lists of things. Yeah, no problem. Then that should be the answer. If it’s a nicer class property, this is where, like in the beginning I would want to be cheap.

I would want to buy the property with a tenant in place. Cause I thought I was. Being super clever and saving 500 bucks, at least something fee often when you’re cheap, easy and free, you get burnt in the future. And I did because come to find out that seller just wants this stuff, any warm body in there.

And I had no recourse and I had no insight on what that tenant was. There are some ways you can mitigate that by saying, Hey, I want to see their credit report. I want to see the background check on this person and running yourself. Sometimes they’re not going to give that to you. And then I think the best practice is to get your property manager.

On board and have them tenant to house themselves that way it’s their fault. If they bring in a bad person, they don’t have that excuse of like, yeah, I was a stepchild. I just inherited it. There’s stability with a tenant. The tenant is like, what the heck? I just signed with this guy and I got this new dad.

It just makes that sweeter transition because you’re always going to have a changing of a sheriff. Type of situation and you want that more stability to me, I would just, when you tenant get a tenant in place, when you buy it, you’re saving two 5,500 bucks, like a half a month’s rent. I would just rather pay my new guy to do it.

This is getting a little advanced, but maybe I would tell the seller like, Hey, can you just drop the price by 500 bucks or 200 bucks? I’ll go get my own tenant. At risk. I’m cool with not having intentions and they might actually like that. Right. So it’s, again, it’s a conversation again, I wouldn’t be making decisions this decision on your own.

I would run it through your property manager and saying, Hey, here’s this dilemma I have, I can either get it tenanted, or I’m going to have you do it. What is your thoughts here? There’s risks, right? He could not tenant for you for like two, three months. That’s a risk that you have to take. Chad, Peter, you guys did it both ways, too.

What is your guys’ thoughts? Well, my case was kind of special because I bought my property at the start of COVID. So my property, when I first purchased, it was not tenanted. And then COVID happened, then everything was shut down. So I couldn’t get an inspection section eight inspection for a couple of months.

So that kind of slowed me down on getting my first tenant in the property. So mine’s a little bit special. I think for me, um, I don’t have any section eight. I try to stay away from it. If the purchase price or the deal makes sense, then maybe I would consider it. But I just can’t, I can’t really speak to the section eight itself, but then when I’m looking at new properties, although there’s, there’s a lot of, you’ll see on the MLS that has 10 occupied it.

And the least goes to whatever, if it’s a good deal, then maybe, but I consider it a risk just because I don’t know the tenant. And I don’t know how well the property management, the former property management company did things over there. So, you know, there could be issues that you’re not aware of, but especially.

From the tenant side. And you can ask like, you know, Hey, give me your rent roll and try to verify things like that. But it’s not a guarantee you might look good, but you don’t know anything about the person. So all the properties I bought there were, there was no tenants in there. So, I mean, that’s just my opinion.

One on a clean slate. Give me something that I can work. My property management teaming, like what lane said, put them on the hook. It’s not the former. People’s fault. It was just do it from the beginning and just start claim. But I expect a lot of deals out there in the future that will have tenant occupied until something.

And so that’s just something you need to consider, but work with your team and figure that out. If you find a good deal, then it’s worth exploring by. I try to avoid it. With the whole COVID element in play. You’re right. There is a little twist on occupancy is done by maybe a couple percentage points of guests.

But again, you’re trying to buy the best rental property on the block. That shouldn’t matter. You should transcend any big data. Anyway. And a lot of the people not paying rent are mostly people in the blue States, right? I’m telling you this from experience, I’ve got over 4,000 units. Now, people in red States, Midwest, South, Southeast, they just have a different work ethic.

They’re not this like socialists capital of California, kind of nonsense of hashtag free rent. They have a good work ethic. They understand it.