Risks and Benefits of Buying an Occupied Building

 Posted on April 04, 2024 in Real Estate

IL real estate lawyerIf you are thinking of buying a multi-unit building and becoming a landlord, you will likely need to work with tenants who are already living in the building. Unless you are buying a newly constructed apartment building or refurbishing an abandoned one, the property is probably occupied by existing tenants. In most cases, you will be bound by the terms of your new tenants’ leases. You probably cannot remove tenants until their leases expire. Buying an occupied apartment building comes with both risks and benefits. It is important to speak with your Cook County, IL real estate attorney about how ongoing leases may impact your transaction.

Risks of Buying a Building With Current Leaseholders 

You must honor existing leases when you buy an occupied residential building. Some of the risks involved may include:

  • Bad tenants - The previous owner may not have exercised the best judgment regarding who to rent to. You could have undesirable tenants you would not have rented to. 
  • Difficulty enforcing previously unenforced rules - If the previous landlord allowed tenants to cause property damage, litter, create noxious odors such as by smoking indoors, or disturb the peace without repercussion, you might need to deal with these issues. Residents may push back against enforcement, even if they agreed to these terms when they signed their leases.
  • Difficulty renovating - If you plan to renovate, this process might be more difficult when you have existing tenants. You might have to wait until the lease for each unit expires to begin major work on a unit. You may get noise complaints about ongoing renovations. 

Benefits of Buying an Occupied Building 

Benefits of buying an occupied building can include:

  • Immediate profitability - Since tenants are also bound by their leases, you can start collecting rent payments immediately. 
  • Less initial work - You will not need to do the work of finding and screening tenants, and you may not need to spend money advertising right away. 
  • Time limit on bad tenants - Most leases last one year. This means that if you do have undesirable tenants, they will not be around forever. You can refuse to renew tenants’ leases for almost any reason. 
  • Less initial repair work - Unless the landlord before you was severely negligent, it is likely that the building is already in good repair and has been reasonably well cared for. 

 It is important to have your attorney assess the current state of the building before you commit to a purchase.

Contact a Palatine, IL Residential Real Estate Lawyer 

Whitacre & Stefanczuk LTD is committed to helping experienced landlords and first-time landlords alike choose the right property. Our experienced, Polish-speaking Cook County, IL real estate attorneys will help you assess the risks and benefits that come with the apartment building you are considering buying. Contact us at 773-622-6100 for a complimentary consultation. Mówimy po Polsku.

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