Considering buying a rental property with inherited tenants? Here’s how a recent acquisition by one of my partners and I went.
Good old inherited tenants—if you’ve purchased a property from a tired landlord or mom and pop owner, you understand that dealing with them can oftentimes be a pain. Sometimes the reason the owner is selling the property is due to the troubled tenants. Once you buy it, that problem becomes yours to solve.
My Inherited Tenant Deal
Just recently, my partner and I purchased a property where the tenant was paying just $295 a month in rent. They had been living there for 20+ years. Talk about a landlord afraid to raise the rent! The property had no lease in place. Instead, there was a handshake agreement between the tenant and the old landlord, allowing the occupant to live there. The fair market rent on the house should have easily been $700+ per month. The numbers worked at the current rent, but they would be even more appealing if the tenant moved out and we renovated the property to get higher rents.
Working it Out
We got in contact with the current tenant to notify them that we were the new owners. We let them know that we planned to offer a discount in rent to them, but it would need to be nearer the fair market price. Unfortunately, the individual was on a fixed income and was barely making enough to cover the current rent. In these scenarios, my partner and I always do our best to work with inherited tenants. Still, in my experience, 40-50% of them just do not work out. That is a high percentage, but that’s just how it works out.
Make the Call
As much as we wanted to keep the current tenant, it just didn’t work. We mailed them a 30-day non-renewal notice, which is a requirement in my state, even if a tenant does not have a lease. This may be different for your market. Just make sure you know your local laws. The tenant will now be moving out shortly (hopefully).
It is not easy dealing with these tenants. It’s best to do what you can for them because some of them do work out. They can be great tenants and may prefer paying more to moving. If you feel they’re stringing you along, then they probably are, and it is best to act fast to get them out and replace them with a fresh renter at better rates.
Have you ever dealt with troublesome inherited tenants? How did you handle the situation?
Let me know your experiences with a comment!