Take a deep breath. You are not the first person in the history of real estate who may have to inherit tenants to get a deal you really want to take down. With that said, this prospect can be pretty daunting if you have never experienced it. Here are some tips…

Request the Units Vacant Upon Sale

First thing you have to decide is if you even want to purchase a home with tenants who already occupy. If that answer is either a “heck no” or a “I would rather not” then you can always write as a contingency in your offer that the apartment units of the home be vacant upon sale. Suggest this first because this is the path of least resistance for you as the new buyer. Will a seller be willing to do this for you? I have seen it work both ways, but hey you won’t know until you ask.

Get a Complete Picture of the Financials (Due Diligence)

One potential great thing about inheriting tenants is you walk into a situation where the property is producing income from day 1. That sounds good in theory, but you want to make sure you are confirming what the seller is claiming in terms of the income (rent) and expenses being produced by the property. Get copies of any and all active leases so you can confirm the rent amounts, security deposit amounts, lease start/end dates, and what utilities the tenant and landlord are each responsible for. This should all be clearly spelled out in the lease.

Make Sure You and the Tenant are on the Same Page Before You Close

By this point you have been provided and verified all of the information the landlord has claimed regarding income and expenses. The final step before you close is to have the tenant verify all of the same things the landlord did so there is no confusion or he said/shesaid type issues post closing. Have your attorney coordinate having the tenant sign what are called “estoppel certificates”. The estoppels clearly lay out what the tenant is paying for rent, what utilities they are responsible for, how much of a deposit they gave, and if they are current on rent. Now you have a record of the tenant signing off on all of this so your new landlord/tenant relationship is starting off on solid ground and as a landlord you know exactly where you stand when it comes to the finances of the property.

So now the seller and the tenant have both confirmed all of the income and expenses you will be walking into as the new owner. You can take a sigh of relief in knowing that everything is on the up and up on the day you close.