tenant hasn't paid for past 3 months on rental i am supposed to close on

[angeles]

i am supposed to close on my first rental property next week but have run into a glitch tonight when i received an email from a realtor that is the buyer and seller realtor who told me he found out that one of the tenants has not paid their rent for the past 3 months and he suggested that i begin the eviction process or call her to see if something can be worked out.
i hate going into a rental property - especially being my first - with a tenant that doesn't pay and the possibility of having to do an eviction from the start because i am sure that besides the lack of rent the process is probably not free so a huge possible negative cash flow will meet me from the start.
so my question is, is this a reason that would allow me to legally back out of the deal?  or at the very least, tell the previous owner that we will not close until he cleans up his mess?  it seems logically that it should be a fair reason to not go through with a deal but since I am new at investing, I obviously don't know how the system works. 

I first saw this property and started the process of purchasing about 6 weeks ago and the mortgage broker has just been relaxed through it all although right now I am thankful for that since we might not have learned this before the closing date if it would have closed sooner.  i asked about the tenants before signing the contract and received copies of their leases and was told everything was great with the tenants and thought I did all my due diligence but I guess not.  Live and learn.

thanks for the help!
Angie

[justin0419]

You can't start any eviction process on the tenant yet.  They're not your tenant yet.  Depending on your state laws, an eviction could be a fairly quick and inexpensive process or it could be a nightmare.  You could have put in the contract that the property be delivered to you vacant (unless the tenant still had time on the term of their lease).  You could always try to back out of the contract somehow, but the problem is with the tenant and not the property.  You buy a property because it's a good deal that will make you money.  You don't buy it because a tenant is in place.  That tenant could turn into a dirtbag, die, etc.  The value is in the property.  If you do this long enough, you're going to have to face an eviction at some point.  No matter how good the screening is, it happens to all of us eventually.  If you want the property and can afford it, I suggest you continue on and deal with the situation at hand.  We don't know why the tenant is not paying...only that they're not paying.  I'd confront them right after closing and let them know the ownership changed hands.  Their options at that point are to sign your new lease and abide by your rules or they can get out.  If they refuse either, give them a notice to pay or quit applicable to the laws in your staten and start the eviction process. 
The current owner probably didn't want to deal w/ the hassle and the tenant has got a few months rent free. 

[HPM]

If the deal was good to begin with, don't back out.
I always go into a rental purchase expecting to negative cash flow for a while.  Sometimes it's positive instantly, just don't bank on it.

I bought a small house in a bad neighborhood for dirt cheap because the landlord couldn't cash flow because he couldn't collect rent.
I fixed a few things, even raised the rent, and haven't had problems.
Turns out they just couldn't manage money and splitting the rent into 2 payments was enough.

Go into this being fair, but firm.  When I stopped being overly nice and waiving late fees, my teneants started paying.

This could be as simple as the tenant knew about the sale, and knew the previous landlord didn't care and milked the system.  Give them a clean slate:(the previous 3 months doesn't matter to you)
After you buy it, serve a five day notice after the first late payment, start eviction.

[nsu1997]

Simply hand over the eviction proceedings to a good real estate attorney as soon as you close. Let him/her handle it for a couple hundred bucks. This way you never have to interact with someone else's bad tenant.

By the way, if I were you I'd try to use this situation as leverage to get a better deal on the buy.