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Seller wants the buyer to keep existing tenants  


Trusted Member House Academy Forum
Joined: 1 year ago
Posts: 20
July 17, 2019 3:55 pm  

One of our potential sellers mentioned that they have two tenants who have been living in the property for over twelve years and are currently on a two year lease. What is your general approach to dealing with long-term tenants? The seller also mentioned that they would prefer a buyer who would keep the tenants in place.

Eminent Member House Academy Members
Joined: 1 year ago
Posts: 16
August 3, 2019 11:44 am  

What I would do on this is find out if this is an absolute requirement. If it IS, then I would move to buying the home on an option. Move forward as is and find a buyer who will agree to these conditions.

However, this throws the numbers off from the House Academy model to a more traditional model, where you are going to sell to a landlord, rather than a renovator. Thus, the numbers need to make sense for a landlord now.

To buy the home right, you'll need to take into account the 1% model that most landlords are going to be using in their calculations of whether or not to purchase their home. The 1% rule is basically this: is the monthly rent 1% of the final price of the purchase (and urgent repairs) of the property?

If the seller can't agree to that, walk away. If the seller does agree, then take the deal to your local Real Estate club. They are often packed with landlords who are looking for more homes. Bring some flyers and shake some hands!

Make sure your wholesale fee is built in to the deal.

Best of luck!

JT Taylor

Amy Aziz liked
Member Admin
Joined: 11 months ago
Posts: 95
August 16, 2019 4:48 pm  

Paying Tenants definitely make things complicated, but they can be considered a perk to potential buyers. I would check how much rent they are paying. If they are locked in at significantly less than market value rent for that area, I would steer clear, but on the other hand if they are locked in at a high price I would see that as a bonus.