In this video, seasoned real‑estate professional Joe Homs walks new and experienced investors through the critical due‑diligence process when purchasing a rental property that already has tenants. He explains why buying a property with tenants can be advantageous but also risky, and outlines a step‑by‑step checklist: meet the tenants in person, document the unit’s current condition, review or obtain the lease agreement, verify security deposits and escrow credits, ask targeted questions of the seller/landlord, and uncover any required disclosures (e.g., recent death, structural problems). Homs stresses the importance of direct tenant communication to gauge satisfaction and uncover hidden maintenance or landlord‑responsiveness issues. He also touches on disclosure strategies in California, the nuances of landlord‑tenant relationships, and points viewers to a supplemental video on eviction tactics. Throughout, he encourages viewers to subscribe, reach out for help, and use the presented questions as a framework for evaluating any income‑producing property with occupants.
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In today's video, we're going to talk about the questions that you should be asking when you buy properties with tenants in place. Coming up next. As an investor and for building long-term wealth, it's a great idea to buy income-producing properties. Or what's called buy and hold investing. Oftentimes when you're buying rental properties, they come with tenants already in place. This can be good if they're long-term, on-time paying tenants, or you could be inheriting a problem that the current owner is trying to get rid of. How would you know? I'm going to break it all down for you right now. I want to say, I really thank you for all the feedback that you've been providing me on all the videos that I've been making. I made this channel for the new and experienced investor, those of you who want to create the life they've always wanted through real estate. I have over 40 years of experience as a broker, mentor, and investor. Make sure that you subscribe so you never miss a thing. Let's talk about some pros and cons when buying a property with tenants in place. So Obviously the biggest pro is that you have somebody that's paying rent. It's incumbent upon you to do your due diligence to check out everything related to this tenant. Okay. So when I go in and I buy a place with the tenant in place, I make sure that I speak to them in person. And there's some other questions that we're going to go over here in a few minutes that you should be asking. I document everything. So I document the condition of the home that they're living in now. And I need to also look at the contracts and look at the inspection agreement when they initially sign the agreement to lease the place to make sure that there may, may be some issues that have come up along the way. Sometimes their fault, sometimes not their fault. But I want to document all this stuff so that when I step into the new owner's place, everybody's on the same page. Everybody knows, hey, when I, when I first moved in 5 years ago, this is what the place looked like. Here's some pictures. Hopefully you get that information from the new owner. Maybe you don't. But then document what it looks like today so that when you go to rent the place at a future date and this person is moving out, Obviously you have a deposit, hopefully you have a deposit, and you can take and subtract whatever needs to be subtracted from that deposit to put your unit back in rentable condition. So now there's some questions that should be asked, and that's what we're going to go over next. Here's a list of questions that you need to ask to assess the current tenant situation. Do they have a copy of the current lease agreement? Do they even have a lease agreement? That's probably the first question you need to ask of the current landlord owner. That is very important because sometimes I inherit properties with no leases, and that's something that you're going to need to sit down with the tenant prior to closing to develop your own lease if they don't have one in place, because you want to have the proper documentation as you move forward because you become the new owner of this property. When did they start leasing the property? Do they have a deposit? Okay, because all that needs to be credited in escrow to you. You can't, you know, let the previous owner have that because that's not really his money or your money. You eventually have to pay that back. So those are the type of questions that you need to ask up front, and I like to sit down that tenant and speak to them about all these questions. Second question is, can I speak with the tenants directly? Hopefully you get a positive response to that question. If you get a negative response, then, you know, that's a red flag. Understand that most of the time when we offer on multifamily properties or homes, we offer what's called subject to. The acceptance of that contract. Once that contract is accepted, then we have the ability to go in and do our home inspection and also at that time speak with the tenants. You'll gain a lot of valuable information from the tenants during that period of time. They may be reluctant to call the landlord for little issues or little problems, or they may have called the landlord with bigger issues and the landlord's unresponsive. So you need to find out where they are in that process and then try to resolve those issues moving forward from there, especially after you close. Let's talk about what are disclosures. So real simple off the bat here in California, if somebody's passed away in the property in the last 3 years, they have to disclose that to you. Now, there's 2 schools to that thought. One, you disclose it upfront, and then if somebody has a problem with that, then they're not even going to put an offer in on that property. The second school is, hey, we disclose it after we get an offer signed from an individual. It really depends on you as an agent, if you're doing this as an agent, how you want to do that. I always prefer to do it upfront because I really want to know before I even go through this process, that this person is serious. So disclosures are very important. I always ask for any disclosures that the real estate agent or the owner may know of already. Maybe they have filled out their disclosure report. Maybe they're able to tell you that there's some foundation issues. Maybe they can tell you there's some roof issues. All this is information, if you can acquire it upfront before you continue on this process, that would be helpful For the buyer, if you're representing the buyer at that point in time, and even the seller, because again, you want somebody serious that's going to go into this transaction and it's going to close at the end of the day. So knowing all this information up front is really kind of, to me, it's kind of best for both parties. So that's a great question to ask. The landlord-tenant relationship is a nuanced situation and can vary from person to person. Sometimes the relationship can form without effort. In other cases, The 2 sides can't even seem to find common ground, and eventually they have to move on. It takes considerable effort from both parties to maintain good relationships. Hopefully this video gives you information on what questions to ask before you find your next property. If you're completely new to rental real estate, and if you want to know more about the current eviction situation, Click on this video right here. I invited my good friend and eviction attorney to one of our monthly meetups. He broke down some creative ways to get your property back from non-paying tenants. As always, feel free to reach out. I'm always here to help.
