Do Not Disturb (The Tenants)

Many new real estate investors have bought at least one piece of real estate, their own home.  They have been through the real estate purchasing process at least once and this process is their frame of reference for future purchases.  The process for purchasing investment real estate is very similar.  You negotiate with the owner, agree on a price, draw up a contract, fulfill the terms of that contract and close the deal.  One key way that the process is different however revolves around existing tenants.

Investment properties like duplexes, quad-plexes, apartments and even single family homes that are on the market often have tenants in them.  Tenants make showing the property difficult.  The current owner is simply not going to invade his tenant’s privacy every time someone thinks they may want to buy the property.  You as a buyer have to realize that you will often have to make an offer on a property without seeing the entire property beforehand.  This is generally not a problem as we shall see below.

Tenants also require a certain level of discretion on the part of any prospective buyer because many times the owner has not told the tenants the property is for sale.  Often there will not even be a “for sale” sign on the property because the owner does not want the tenants to know that the property is on the market.  Why not?  People hate change.  A sale of the property means change and many tenants will simply move rather than deal with change in ownership (Yes, I know moving involves change as well but that is just the way tenants are.).

So when looking at an investment property with existing tenants, NEVER disturb the tenants in any way shape or form.  Always inform the listing broker or owner before you go on the property.  The agent or owner will most likely want to meet you at the property to show you a vacant unit (or possibly an occupied one) and prevent awkward encounters with the tenants.  You can always do a drive by for a look, but do not do much more.   If you do, you may just anger the owner enough that you will loose the deal.

As you can see, you will almost never see all parts of an investment property before you make your offer.  So how do you protect yourself?  You put a clause in your contract stating that the contract is “contingent upon the inspection and approval of the condition of all dwelling units.”  Once the seller and his agent are confident that you are a qualified buyer who can close and intends to truly buy the property, the owner will arrange for your inspection of all dwelling units and most likely let his tenants know that the property is going to be sold.  If, upon inspection they are in a condition that you anticipated then move forward and close.  If not however, it is time to return to the negotiation table.