sub tenant in place

You just have to due diligence on the tenant using whatever package they submitted to the coop. If it is some one who works for a large company, the chances of NOT moving out are low. In addition, assuming this person went though board process for approval, that reduces the hold over chances even further.

But your lawyer can hold some money back in escrow to be paid when the tenant moves out.

I would caution against buying any property with a tenant in place. How do you really know what that tenant is like? What happens if they decide they don’t want to move out? I don’t know what the laws are like in NYC, but in many parts of California, if a tenant refuses to move out at the end of the lease, the owner has to pursue an owner move in eviction which can be lengthy and costly. I am not advocating against being a landlord and investing in real estate as such, but when YOU pick the tenant and do your own due diligence, it’s clearly different from buying a property with a tenant in place which you know absolutely nothing about. At a minimum, I would ask for a hefty, hefty discount. Other buyers will be turned off and it’s not easy to sell a tenant-occupied property when you can’t stage the property or count on the property looking reasonably nice and clean when buyers walk through.

What they said, in spades. Updated due diligence with the co-op super and managing agent to see if the tenant has been a problem. Due diligence with your insurance company to understand the cost of insurance with a tenant vs you as tenant (liability, damages, etc.). Re-run/update credit checks on the individual. Due diligence of the tenant's lease to ensure there's only the tenant on it (verify w/ super/managing agent that only 1 person is living there). Huuuuuge amount in escrow to cover non-move out, or damages to the property.

But, unless this is an all cash sale with a fast closing, why not go into some form of contract that will close after the tenant moves out? 6-7 months isn't that long to get everything done. Is the property so fabulous that you would buy it with a smaller discount if it were delivered empty?

And I want to add…the amount of rent they are paying, even if it’s significant, should not play a role in your consideration. In my experience as a landlord, my best tenants were the ones in “poorer” areas paying less. The higher paying renters were often prima donnas that would constantly complain. It’s the whiners, complainers, call you at 1 am demanding a light bulb be changed type of tenants you really want to avoid. They might be doing all communication with the landlord, so there is no “record “ of their complaints other than what the landlord says, and of course the landlord/seller will probably say they are “dream” tenants. You just need to think real long and hard if you want to become a landlord. If you really love the property, put in a condition that property must be delivered vacant and offer to close after the tenant leaves. If you put down a deposit, it’s a sign to the seller you are serious and will be able to close once the unit is vacant. And I can’t see a reasonable seller disagreeing, unless they know how difficult this tenant is AND they DO have serious concerns that the tenant WILL actually vacate

I am guessing it is simpler for the owner to rebate the existing tenant 2 months of rent, move out and sell it to you vacant.

@Yentle - IMHO, you will get a buyer for your place if you market with limited-term tenant in place at a discount. The real estate you own is niche, for sure, but the broker whose competence you question can get the difficult job done.

P.S. - With the time remaining on the limited sublease and the time needed for board approval plus any renovation plans, I don't think a price discount is even necessary (given that the market clearing price is already abysmally low compared to last/your transaction price).

>The higher paying renters were often prima donnas that would constantly complain. It’s the whiners, complainers, call you at 1 am demanding a light bulb be changed type of tenants you really want to avoid.

What??!!

>> Would you buy/takeover a co-op subject to a short term sublet with about 6-7 months remaining on the lease (and which gives owner a significant monthly rent) if you were offered a decent discount on sale price?

For the right amount of money, I can get behind anything. Kinda a silly a question to ask, or answer, in the absolute. But yes, if I were offered a 100% discount on sale price, I’d be willing to buy it.

Aaron2>> But, unless this is an all cash sale with a fast closing, why not go into some form of contract that will close after the tenant moves out? 6-7 months isn't that long to get everything done.

This might be the cleanest answer: a contingency on the tenant moving out by month 7. This is a coop, so the buyer is not an investor but rather looking to move in with likely a degree of flexibility on timing if they’re OK with a 6-7 month timeline. In the unlikely case of a holdover, the buyer’s flexibility can turn into “meh, try something else”. But at least they don’t inherit a headache.

I tried to buy a tenant in place coop as an income property but the deal finally fell through. Tread carefully.

Just start marketing in 3 or 4 months as long as you can make reasonable arrangements with the current tenant to allow for photographs and showings. We've done that quite often, Just find an agent that can put together a good plan and make nice with the tenant so they feel confident in allowing showings 2 days a week, one of those days being an hour and a half to 2 hours for an open house on Sunday. Then we typically like to be able to have an hour booked for an evening on Tuesday for follow-ups. I usually suggest offering the tenant the last month free if they agree to this arrangement.

Even if you wind up going into contract right away, the tenancies will be up by the time you close. And hopefully the tenant will be out! This will also put the home on the market at the beginning of the prime spring selling season.

Keith

“>The higher paying renters were often prima donnas that would constantly complain. It’s the whiners, complainers, call you at 1 am demanding a light bulb be changed type of tenants you really want to avoid.

What??!!“

In 15 plus years being a landlord in two countries and 4 different states, I’ve pretty much seen everything. The good, the bad, and the ugly…mostly good thank god!

Alternatively, you can just buy the tenant out. Market it as "tenant in place till Date X, with possibility of an earlier close" and see what you get.

ali r.
upstairs realty