Buying a Multifamily With Tenants in Place in Massachusetts: What to Check
When you buy an occupied building, you're buying the leases too. What to review before the purchase and sale agreement, and what to handle in the first months after closing.
Buying a multifamily with tenants already in it can be the easiest way into rental income: the units are full on day one. It can also be the way new landlords inherit someone else's problems.
When you buy an occupied building, you're buying two things: the property and the leases. Here's what to check for both.
What should you review before the purchase and sale agreement?
Ask for these early, ideally before your inspection deadline:
- Every lease, in full. Rent, term, end date, renewal terms, who pays which utilities, pet and parking terms.
- A rent roll: every unit, current rent, lease dates, and whether each tenant is current.
- Tenants at will, meaning anyone living there without a written lease. Their situation is different from a tenant with a lease.
- Security deposits and last month's rent: how much was collected from each tenant, when, and where the money is held.
- Any disputes, notices, or late-payment history.
- Lead paint status. In buildings built before 1978, Massachusetts has specific obligations when children under six live in a rental unit. Ask about any lead inspections or compliance letters.
- Estoppel letters, if possible: tenants confirming their rent, deposit, and lease terms in writing, so the seller's numbers aren't the only source.
Why do the leases matter so much?
Because existing leases generally stay in effect after a sale, and you take over as landlord under their terms. That means:
- A unit rented well below market stays below market until the lease ends.
- Promises the old owner made in writing are now yours to keep.
- You can't just raise the rent mid-lease unless the lease allows it.
Those facts belong in your price.
What happens to security deposits at closing?
They should transfer to you. Once they do, you're responsible for them.
In Massachusetts, the rules around security deposits are strict. Among them, landlords generally must hold tenant security deposits in a separate, interest-bearing account in a Massachusetts bank, not mixed with personal or operating money, and give tenants specific receipts and annual interest. Mistakes can be expensive for landlords.
On a three-family I helped a repeat client buy in Uxbridge, the deposits transferred at closing, and one of the first things we flagged afterward was setting up that separate account and confirming the amounts with the closing attorney. Here's that case study.
What should you do in the first months after closing?
- Introduce yourself to every tenant in writing, with how to pay rent and how to reach you.
- Set up the deposit account and document each deposit.
- Calendar every lease end date.
- Decide on renewals early. Keeping a good tenant at a fair rent is often worth more than chasing a higher rent through a turnover.
- Use proper lease forms for renewals and new tenants.
- Plan for turnover anyway. In that Uxbridge building, one tenant moved out at the end of the lease even though the others renewed.
Is it better to buy occupied or vacant?
Occupied gives you income immediately, as long as tenants pay market rent and the paperwork is clean.
Vacant lets you choose every tenant and set market rents, but you'll carry the building until it's leased.
Neither is automatically better. The leases, the rents, and the condition decide it.
Questions people actually ask.
Do leases transfer when a rental property is sold in Massachusetts?
Generally yes. Existing leases remain in effect and the new owner becomes the landlord under their terms. Tenants at will are treated differently. Have an attorney review every lease before you commit.
What is a rent roll?
A list of every unit with its current rent, lease dates, deposit, and payment status. It's the starting point for underwriting an occupied building, and it should be verified against the actual leases.
What is a tenant estoppel letter?
A signed statement from a tenant confirming their rent, deposit, lease terms, and any disputes. It helps a buyer confirm the seller's information.
How should I hold security deposits in Massachusetts?
In a separate, interest-bearing account in a Massachusetts bank, not mixed with your own money, with the receipts and interest payments the law requires. Check current requirements with an attorney.
This article is general information about Massachusetts real estate, not legal, tax, or financial advice. Every property and transaction is different. For advice on your situation, talk with me and, where appropriate, an attorney, lender, or tax professional.