Hi everyone,
I looked at a property today that I am thinking of making an offer on. Its for sale for around $250k but is currently returning $350 p.week. (There is a separate self contained granny flat which helps get the return). This is on a separate leasee with the real estate agent. Its pretty legit, two water metres, two elec boxes etc. If I spruced it up inside, changed the config a bit, may get close to $400 a week. So my question is, the tenants are filthy, the place is a mess, the rent is behind. Am I within my rights to buy the place “vacant possession” and then spend a week fixing it up and then rent it out to someone else. What happens if they come back and want to re-rent. Can I be choosy – these tenants smell trouble BIG time.Any comments from people with experience in this would be much appreciated. The place is great and has enormous potential. The tenants are freaking me out tho.
Thanks
Of course you can buy it subject to vacant possession.
You can also select the tenants you choose as long as you don’t discriminate. This is nothing to worry about anyway – just quietly tell the PM that you don’t wish to rent it to them.
All the best
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
My understanding is that if they are on a lease, you cannot ask for vacant possession. However, if you go ahead and purchase and they fall behind in their rent, you can give them notice.
Going by what you have written, I’d go ahead and buy it. Keep taking the current rent until the leases end (make sure you give them the right amount of notice that you will not be renewing the leases) and then go ahead with your renos.
If they happen to apply to rent again (not likely as they would have found something else by then) you just don’t rent to them. Take an application but rent it to someone else.
My thoughts, Wylie.
Originally posted by Wylie:My understanding is that if they are on a lease, you cannot ask for vacant possession. However, if you go ahead and purchase and they fall behind in their rent, you can give them notice.
Going by what you have written, I’d go ahead and buy it. Keep taking the current rent until the leases end (make sure you give them the right amount of notice that you will not be renewing the leases) and then go ahead with your renos.
If they happen to apply to rent again (not likely as they would have found something else by then) you just don’t rent to them. Take an application but rent it to someone else.
My thoughts, Wylie.
Of course you can ask for vacant possession. You can ask for anything you like.
If on a lease then it is harder for the vendor to deliver and it may delay settlement – which may not be a bad thing.
If they are as bad as it sounds then it may not be hard for the vendor to have them finish the lease early. Alternatively he can offer to pay them something towards moving costs, not press for bond forfeit for damages etc to make it attractive for them to move out.
But as always – the more conditions in your offer generally the higher the offer must be to compensate.
Good suggestion to just buy it, let a PM deal with problems then not renew their lease and reno then.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
What is the length of lease left on both the main house and the granny flat.
Is there a clause in both where you can evict them with notice.
Calculate what the time lag effect is, w.r.t. the purchase and in costs, and go from there.
On a general note, these are exactly the type of properties I look for also. Great bones – shocking tenants. Able to use the filthy premises as a great lever tool against the Vendor. I especially love it when the agent grimaces, or refuses to come with you ‘cos it might mess up his suit or damage her high heels…beautiful.
Purchase it cheap, muck in there with your boots and overalls, clean the grot out and away you go. Up goes the rent and up goes the value.
How’s the dirt ?? Any restrictions on the title, any dodgy overhangs or anything legally askew with the title in any way ??
If not – givva.
Thanks everyone for the responses. REALLY appreciate.
Yes I realise I cant discriminate but thats exactly what I would be doing if I didnt release to these people (if they chose to come back). i.e. I dont want to rent to them, they are filthy, they dont work AT ALL, everytime I have been there they are drunk (even in hte morning) and the place is a pigsty.
Re leases – the front house is on a month to month, the 6 month lease expired in Dec. The granny flat however still has 2 months to go on the lease. So my thoughts are…… settle with vacant possession , get a 10 week settlement – and add a clause in that any damage caused prior to settlement is the owners responsibility. I’ll then spend a week fixing it up (might take a skip to get rid of the empty beer bottles lying around!!) and re-rent. I guess i just then have to rely on other people applying to rent the place and hope that they dont reapply.
Thanks for everyone’s comments. I know the place has long term potential, coupled with the great return. Just got to sort out the tenant problem.
You’re right, Real estate agent was not too fussed on checkign th place out. On the 2nd inspection I made her enter the granny flat first, it was dark, there was a group in there getting totally drunk and stoned. AND it was the middle of the day!! Plus when I opened the kitchen cupboard I saw about 4 cockroaches running over the crockery! How do people live like this?
Thanks for the support!
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