Lately I have purchased several tenanted properties in rough condition from distressed sellers. It’s always the same old story the seller just needs some extra money so they are selling the home. They expect you to believe that the tenants are A-1 and happily pay on time every month!
If the property really does perform then how am I able to buy at such deep discounts??
Now any time you buy a tenanted property and evict the current tenants to start the rehab, that night your home usually gets broke into and you arrive in the morning to a water park in your investment property! This is the worse feeling in the world!
Here are my 5 tips to success investing in non performing tenanted properties
1) Once you have title go to the property and introduce yourself. Let them know you are the new owner and ask them if they are interested in staying. They always are!
2) Walk the property with the current tenants and ask them what needs to be repaired (this always turns into a long list!) be prepared to write!
Ask them if they will have the full rent on time this month. If they won’t, find out when they will or how much they will have and lock in that date.
4) Give them a reason to pay and stay!
Tell the tenants that if they pay the rent on time you will fix their top 5 items on their list (this does not include stuff you have to fix dangerous items and liabilities need addressed ASAP to avoid court drama!) This will give them incentive to pay promptly as they will have a home they will be proud of.
5) Discount the rent a little
Only do this if you really have to! If you kick out a non paying tenant you expose yourself to vandals as your house is vacant, you lose rental income during the rehab process and then you have marketing time with expenses to find a new qualified tenant. All of this can add up to thousands very quickly!
It may be easier to discount the rent by $25 to $50 per month costing you $300.00 to $600.00 per year. I’ll take that option over the stress of a vacant property all day long and remember as you clean up the property over the first year you can always raise the rent when it’s time for them to renew their lease!
These are tips from my personal experience investing and they work! Don’t be afraid to make really low offers on non performing properties then try they steps to start cash flowing immediately!
Visit michaelalder.com/resources for books and programs to become a more successful investor!