The Risks of Buying Occupied Properties

I know it’s very tempting to purchase properties that currently has residents for a humongous discount. Usually, when you see publicly listed properties that seem to be very much under market value, there are occupants in there and you won’t be able to know what will occur in regards to getting them out once you buy it. At the right numbers, all deals make sense, but you should take into consideration that there could be some damage done or time before you can occupy the property and do what you want to do.

You’re not really supposed to touch base with the current occupant, but you can go knock on the door and just chat to see what their game plan is. Try to figure out if they are looking to move out, if they’re aware of the situation and that the property has been sold. One red flag is if they automatically say, “No, this is my house, I’m not giving it up,” if they’re very emotional. That’s a problem if they are very tied to the property—it may be difficult to get them out.

Sometimes it’s just a tenant living there and they plan on moving when the lease is up. Tenants aren’t typically as emotional about a property as a homeowner is. If there is some time left on the lease, you may be able to offer a tenant “cash to keys,” which is a few hundred or thousand dollars to help with their moving expenses and they’ll just leave.

Either way, you need to assess the situation, by knocking on the door, phone, or mail. The thing you are trying to avoid is having someone go on a rampage and cause a lot of damage by taking a hammer to drywall, ripping out appliances, etc. It’s one thing to have to paint or put in new carpet, but the last thing you want is someone causing so much damage your good deal ends up costing a fortune to fix. If you buy an occupied property, you have to know that your construction costs could end up being very high. Also, depending on what state you’re in, if you have to go in and evict someone after you take ownership, that could take quite a bit of time and there are a lot of different laws related to that.

To sum up, I do think you should be buying occupied properties. You can get them at a large discount, but make sure you do whatever you need to do to assess who is currently there and to see if you can help them move on their way. Also make sure you have extra contingencies for construction overages if they do tear up the house and that you have some flexibility with financing if it does take longer to move them out of the house.