You’re in the market for a new investment property and you find the perfect house for your growing portfolio. It’s in a great location, is priced well, and has all of the features you are looking for… and you find out it has a tenant. This could be an ideal situation! Before you get too excited, there are a few things to know about buying a house with tenants in Chicago, IL.
Before the Offer
As with any investment real estate purchase, you must complete your due diligence. Call us at (312) 300-2043 to schedule an appointment to view the property. Be aware that tenants usually have a right to receive a 24-48 hour notice for showings and they must be during reasonable times. Also note, tenants by law usually don’t have to vacate the premises during showings or keep it “show – ready.” Some tenants may also try to prevent the sale of the property, so keep that in mind. Try to overlook the tenant and their personal property or what they’re doing while you’re there, just focus on the structure itself. Be pleasant and friendly with them, but don’t ask questions about the house or the current owner. They also may have first right of refusal on the property, so your offer might get beat by the tenants themselves.
Seller Negotiations with Tenant
Depending on your plans for this property, you may or may not want the current tenants to occupy the property after you purchase it. If the seller is motivated enough, you may be able to make an offer contingent upon the tenants vacating after the sale; this option is the least hassle on your part. It will then be up to the seller to pursue multiple channels to negotiate the relocation of the tenants.
Your Negotiations with Tenant
If the seller cannot negotiate with the tenant, you will have to try to negotiate with them. If you try to break the lease or force an eviction, you may end up with a lawsuit on your hands. If the tenant refuses all attempts at negotiation, they have the right to complete the lease under the current lease terms. Make sure to approach the tenants gingerly. Once the property is sold, they have the right to leave the house in whatever state they please. If you purchase this property as a foreclosure, most states allow a notice to tenants to vacate in as little as 30 days.
Your Job As A Landlord
If you end up keeping the tenant in place, make sure you are familiar with the laws and the rights of tenants and landlords in Chicago and IL. Double-check the leases for any additional duties you are expected to perform, such as lawn maintenance or utility payments. Some of the basic landlord duties are to keep all common areas in a safe and clean condition; make sure structural elements are safe and intact; ensure that electrical, plumbing, heating/air conditioning, ventilation, and sanitary systems are properly maintained; make sure tenants have access to running water, hot water and heat in reasonable amounts at reasonable times; provide trash containers and removal; manage known environmental toxins including lead paint dust and asbestos, and exterminate rodents and other vermin infestations. Keep up to date with your laws, otherwise, you may be facing a potential lawsuit.
The Closing Process
Once you have made the offer and figured out how to handle the tenant situation, ask the seller for inspection records before each of the tenants moved in to determine if they did any damage to the property. Meet with tenants before closing to discuss the next steps for everyone. Once the final closing occurs, make sure you get appropriate insurance for your property type and don’t forget to update the property management if necessary!