Hey guys, happy holidays. Here I am in the office today. Got the festive pug shirt on. Wanted to record a video because we get, oftentimes, the same question over and over on, “Do you guys buy rental properties that are rented with a tenant? Whether it’s month to month, or in a lease.” And the answer is, “Yes, we do, in most situations.”
And so that’s why I wanted to shoot a quick video for you just to let you know the parameters of what we look to buy. Because I think oftentimes a seller has a property, and this could be if you’re in-state, it could even be if you’re two houses down from the rental property, and you live two houses down. Or if you live two states away from the property, you’re in California, the properties in Chicago or North Carolina or whatever it is, and you’re an out-of-state landlord, and the tenants are still in there. Or let’s say they’re leaving, or they’ve already left. So if they’ve already left, it’s much easier to consummate a deal because the property is vacant and it’s just easier to purchase for us when it’s vacant.
But we just had a couple of case studies of properties that we bought that the tenant was in the property, they were on a lease, and they were, I think, six months into the lease, so we bought it six months ago. They had still six months to go, we actually purchased the property with the tenant in place, and then the tenant actually just ended up leaving. We rehabbed what needed to be rehabbed, and then we resold the property. So the answer is yes, but there are some criteria what we look for. So A and B areas, and we want to make sure that the rent is close to market rent as possible.
So if you’re looking at selling a property, tenants inside, you’re six months into a lease and you need to sell it, and the market rent is $1500, we’re looking for 1500, or something close to that. It can be really close and that’s okay. But it can’t be like $1,000, $900, $800, because then we have to purchase that, honor that lease, and then in six months, what if they leave? And the property is in disrepair and whatnot.
I’ll give you an example. We just had a story, we purchased a property and the tenants were, I think, maybe disgruntled that the owner was forcing them to leave. So on the way out, on the walls, they painted, it was like a red wall, I think. A red paint wall. And they put in white, “Who buys a house sight unseen?” Over the whole living room wall.
And so, we got in there and we were laughing, because we did walk the property, we saw it. And this one, it was less than a thousand square foot. Usually we look for a thousand square foot or higher. We just know our numbers really well, so it’s just like buying at a courthouse, at the auction steps. If you know your numbers, then you know what the rehab cost is going to be. So they’re thinking, “How can you buy a property sight unseen?” And they’re, I think, teasing us, it was funny. But we knew it had to be rehabbed anyway. Once they leave, we know we’re going to have to paint. Whether they wrote that or not, we know we’re going to have to repaint it. We know we’re going to have to re-sand the floors, add some carpet, clean up the kitchens, light fixtures, that kind of stuff. So, if you know your numbers really well, then you can buy it sight unseen.
The other consideration is that on a rental, if we’re going to keep it as a rental, the rehab is always much less to get it rental ready and place a tenant, than if we were to purchase it to resell it. So livable, sellable, two different cost structures. Does that make sense? Livable, like rent friendly, is a different rehab cost than sellable.
Sellable, everything’s got to be brand new. New kitchen, new bath, new vanities, new appliances, stainless steel. Paint’s got to be super quality. Whereas with the rental, it’s just functional. It doesn’t have to be over the top, so that’s why it’s sometimes half the cost. So that’s a consideration.
The other thing, what we try to look for, is at least, like I said, a thousand square foot, typically three bed. But the caveat to all this is, if you’ve got a two bed or even a three bed, but it’s less than a thousand square foot, inquire and let us know regardless, because we’ll still take a look at it, in special situations, or maybe a reduced price or what have you. So whatever the reason, if you’ve gotten a rental, you need to sell it for literally any reason, you’re in state, you’re out of state, you just don’t want to be a landlord anymore, behind on bills, give us a chance. Go over here to the right, input you’re info, or call us at the 866 number, and we’ll reach out to you. Okay? Happy holidays.