Do You Trust Franklin to Choose Your Tenants For You?
July 30th, 2008 categories: Home Buyers, Investors/Landlords
This is based on a true story. The names have been changed to protect the guilty.
Meet Franklin
My client is looking to purchase a vacant two-family to live in.
Franklin is an “experienced” landlord with property for sale in Connecticut. Franklin has hired a reputable real estate firm to represent him in the sale of his two family, which he and the firm have advertised as being “vacant.”
I called to make an appointment to see the house and was told that there was a tenant in one of the units. I call the listing agent to verify this and to make sure that the tenant is month-to-month since my client is buying the house to live in it and rent out the other unit to tenants they’ve selected.
The listing agent assures me that the tenant is “family” and month-to-month.
My client writes up an offer. After some negotiation, everyone agrees on the terms but I was faxed back the contract with the most important clause of the contract scratched out - “Property to be vacant at closing time.”
Two weeks and 20 phone calls later, we slowly unravel that either Franklin lied to his agent or the listing agent lied to me. The property has a tenant with a lease - which won’t be up for 7 months. On top of it, the tenant is on some type of state assistance and has claimed an “attachment” to the apartment so the owner can’t force the tenant to leave now, soon or possibly ever.
All along, I advised my client that it’s not a good idea to inherit someone else’s tenants because you don’t know the previous owner’s standards.
For fun, I thought we could imagine Franklin’s tenant screening methodology.
Franklin’s Tenant Screening Process
Step One: Put Out a For Rent Sign
Qualified tenants are always just out walking around, looking for signs.
Step Two: Phone Interview with the Applicants to Pre-qualify
Forget employment status and credit history. Potential tenants score points if they have a sob story. See photo of my daughter who knows how to put on a sad face.
Franklin would rent her an apartment today.
Step Three: Show the Apartment
Hey, if they saw the ad on-line, who needs to see it in person. Congratulations! The lease is in the mail.
Step Four: Sign the Lease
Even if it’s on a napkin, it’s binding.
The Problem with Inheriting Tenants
It’s hard enough to choose qualified tenants without adding a middleman - the former owner who you don’t know. Before you buy a multi-family, make sure the tenants are on a month-to-month lease so you, not Franklin, can make the decision. Year leases must be honored by the new owner.
And in case you forgot about the problems tenants can cause, here are some good old fashioned tenant horror stories.
http://news14.com/content/top_stories/597845/man-charged-with-killing-landlord/Default.aspx
http://realestate.msn.com/Rentals/Article2.aspx?cp-documentid=4972876>1=35000
For related stories:
Deadbeat Tenants Win The Day in This Eviction Video
Really, Really, Really Bad Tenants
Even More Really, Really, Really Bad Tenants
