How to buy occupied rental properties, dealing with trouble tenants for showings, contractors, etc.

by | Real Estate Investing, Indiana real estate, Indy Anna

Avoid problems with the current tenants when you are buying a rental that is occupied.

Should you keep a leftover tenant when buying a rental?  If you want the tenant out then what should you do exactly?  What if the current tenant is a problem and the reason the landlord is selling?  Here’s how to deal with occupied rentals that you are buying.

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Now for today’s class on working with inherited tenants on your rentals…

How to deal with difficult tenants: getting showings, inspections and contractor walkthroughs set up easily. How to buy or sell an occupied rental property in Indy or anywhere else;

Indy Anna explains…

– How to buy rentals that are occupied with current tenants and avoid problems
– What to do with difficult tenants and not against them while selling or buying and real life examples and why this might happen
– How to make sure and create the best outcomes for everyone involved

“What are we going to do with the tenant?”

This questions comes up as I work with folks in Indy and elsewhere.  As a real estate investor buying rental property, you must know how to deal with current tenants of the property.  Some investors flat out refuse to even consider deals that are tenant occupied.  After today you’ll know exactly how to deal with both good and bad tenants on rentals that you are buying.

Why do you need to figure out how to deal with inherited tenants?

There are many great deals to be made on rental properties that are for sale with tenants.  By better understanding how to deal with tenant in place you will have more deals to choose from.

First we will talk about what to do about tenants if you are a realtor.  If you aren’t a realtor this is still important because this is how you want to train your realtors to react.

The truth is that many realtors are LCs, plain and simple.  So they will often tell a seller to wait until a tenant’s lease expires before they try to sell.  This can cause major problems and ruin the seller’s ideal timeline.

What realtors can do to avoid problems with tenants:  Qualify and Screen the Buyer.

Here are three basic ways that a realtor can Qualify and Screen the Buyer:

1.)  Only schedule showings with buyers who have submitted accepted offers that may be contingent on a walk through or inspection.
2.) With the offers make sure EMD is included before showings, I also like to have a conversation with the buyer or the agent ahead of time to gauge their seriousness and confirm their financing approval and/or cash situation.
3.)  Include the showing process and the instructions in the MLS description and EVERYWHERE else so that there is no confusion for anybody.

This saves SO much time and I tell the seller AND the tenant the so they know things won’t be a hassle and the it generates goodwill with the tenant so often problems are avoided proactively by doing it this way.

What if you’re on the buying side?

One quick tip is to extend the period of time in the contract to accommodate the showing appointment.  Also make sure you attach an addendum for “contingent upon showing” in the written offer submission.

So that’s with you and/or your realtor.

So what can you do with the tenants?

First the MOST important thing to do with the tenant is establish three things:

1.)  You will be jumping through hoops to qualify buyers so that there are the FEWEST number of showing and inconveniences to the tenant.
2.)  You will make sure they are “taken care of” and not kicked out or hung out to dry.  This may mean helping them rent a new house or even helping them buy a house.
3.)  Even if they aren’t ready to buy you will provide them the resources and game plan to purchase a home, this may mean helping them with their education or career choices so you go way beyond just the house.

These kinds of things will help reduce potential tension and problematic behavior later.

Compliance Dialog to Use:

(Remember to make EVERY conversation a Beautiful Conversation)

Sample Dialog with Tenant:

“Hi John, as you know we have been qualifying each buyer so that you are bothered as little as possible and right now we have an accepted offer on the property, and need to schedule a showing/inspection. Ideally, we want to work with you on this and get it scheduled as soon as possible…

Which three days and time this week work best for you and we’ll see about getting it into the buyer’s schedule.  Just to be clear, it will be about 30 min for the showing/an hour for the inspection and it’s okay if you want to be there for it.

I understand how important it may be for you to be there, and that’s okay. I’ll be there anyway and let them in at our agreed upon time if something comes up, but you’re welcome to be there as well.  Also as I said the sale won’t impact you in any negative way and we are still on track to make sure you come out ahead with our plan as well.”

Here’s what we did there in Dialog policy;

– We extended an olive branch of working with them, not against them we also repeated the qualifying that we do to make it easier on them
– We let them pick the days/times and gave realistic amounts of time the home would be needed for and allowed him to request to be there or not
– We set clear expectations of the showing; IF they couldn’t make the agreed upon time, WE would proceed with the showing/inspection anyway – we also reminded him as the last thing that he will be A-okay no matter what.

Keep in mind you may not get a showing/inspection set up in the first 24/48 hours, but usually within the first week.

Here’s what usually happens with the tenant;

The tenants feel you’ve worked with and not against them and things go smoother
The tenants usually appreciate the offer to be there and will take you up on it
Most of the time the tenant will make the agreed upon appointment. IF they don’t you’ve legally given them notice the showing/inspection will transpire anyway

The backup plan may be Cash for Keys;

Cash for keys is usually an option, prior to sale can be best in some cases. In truly problematic tenant cases, you’re simply getting the property vacant faster.  I’ve made a class on Cash for Keys agreements and when/how they make sense out as well at BigReia.com.

The NICE GUYS (GALS) agent policy for working with and not AGAINST the tenant;

With/Without cash for keys; offer to help the tenant find a new rental
Discuss the home buying option with the tenant – help them meet with lenders and start the process if they are ready – also help them with potentially a better job or education program that will increase their income.  It doesn’t cost anything more for you to point them in the right direction and it can help them reshape decades of financial struggle into financial WINs and generational wealth.
If this is a buy and hold and there is a reasonable option for the tenant to stay, you want to have that discussion with them as soon as possible.

How to NICE GUY (GAL) if the tenant can stay;

Pull rent rolls on the tenant
Pull rental history and screen like any other tenant
Be fully transparent about clear expectations of upcoming repair appointments or possible rent increases

Keep in mind the main reasons tenants can be difficult- the ‘why’

They can be worried about having enough money for a security deposit on a new rental
              Fix; Cash for keys
They can have stress related anxiety about moving
   Fix; Offering to help them find a new rental or help qualify to buy
They have personal reasons scheduling can seem difficult but shouldn’t be
   Fix; Ask why times/days are difficult for them to schedule and I’ll give an example of this  below

Example of ‘difficult’ tenants from this month and policies executed to work with them;

Recently we needed to get inside a property but the tenant didn’t have any available times to accommodate this. We didn’t want the losing agent to simply post notice and got to her ‘why’ instead.

The tenant didn’t want strangers in the property without being home. She worked while her children were at school and she didn’t have a babysitter for showing; in other words, there was not a time she was available that the children wouldn’t be there.

Easy fix; As the buyer’s agent I simply asked the listing agent to communicate this dialog  policy with the tenant.

“Pick three days and times that you can be there with the children. I decide which fits into my schedule best and let you know at least 24 hours in advance. I’ll meet the listing agent there as well in case something comes up at work or school so I can still be let inside. I need to take video and picture footage for my client, but I will not record you or the children in the footage.”

That was all it took and here were the steps;

I addressed the scheduling issue and resolved it
I addressed her concern about being there and communicated it was no issue for me
I also addressed her concern about the children being home and gave a realistic solution

We got inside the property, took the footage we needed and all parties involved were satisfied easily.

Here’s some further legal information on landlord and tenant obligations for Indiana;

https://www.hud.gov/states/indiana/renting/tenantrights

Again, simply using proper framing and dialogue policies will work most of the time and keep everyone happy- I’m just including the legal portion of things for everyone to see.

So, the ideal outcomes;
Sellers and listing agents are on the same page from the start with policies
Tenants are worked with in the process, not against and offered help
Buyer’s agents and listing agents are on the same page from the start, clients on both slides are fully taken care of

EVERYONE wins in other words from the first listing day, to the showing/inspection period, to close and beyond.

Now I’ve made a few other videos on buy and hold investing as well as flipping here in Indy- be sure to check those out after this video for follow up lessons that will help for deals here in Indy.  Also make sure check out our EPIC post on 14 ways to screen tenants and avoid tenants from hell.

 So in summary to deal with tenants:

I’ve covered how to work with difficult tenants in selling or buying
I’ve gone over real world examples of how this can be done
AND I’ve given you the best possible outcomes for everyone involved

So that’s it, make sure to go BigReia.com and get our list of over 100 FREE ways to find motivated sellers, how to buy and sell companies at light speed and retire in the next year with over 30k/month coming in on auto pilot: BigReia.com go there and you’ll…

Make the Universe Smile.

Thanks!  = )

~ Indy Anna
317-969-5619 (that’s my real number, so please text me first Thx!)
Love (at) BigReia.com

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Make the Universe Smile.

~ Indy Anna
Love (at) BigReia.com
(YES that's my actual Direct Line and I really do answer lol, so please text me first Thx!)

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