Finally pulled the trigger
I'm not exactly new to BiggerPockets, but I am new to posting and investing. I've been educating myself on real estate investing for several years and I finally pulled the trigger on an investment property. Here's a little background about me. I'm 42, and married to my amazing wife whom with I have a 2 year old son. He is my inspiration for getting over the analysis paralysis stage to actually taking action. We have been looking to move into a larger home with more land closer to my wife's family (about 45 minutes from where we currently live) so that our son can grow up with his cousin who is less than 3 weeks older than him. Unfortunately with the current market conditions and recent interest rate hikes, we have been priced out of a majority of properties that we are looking for. So we switched gears and decided to increase our income with rental properties. Here are some details about the deal along with lease question (I know that nobody can give legal advice, just trying to get a consensus opinion).
The property is currently rented for $1200/month, which is about $300 less than market for the condition of the property in the area it is in. Our offer was for $207,500 cash with a 30-day closing and our offer was accepted. Upon receiving a copy of the lease, it shows that there is a renewal term that reads:
STARTING AND END DATE OF LEASE(also called "Term"):
A. STARTING DATE: This Lease starts on: August 1, 2019 at 12 Noon.
B. ENDING DATE: This Lease ends on: July 31, 2020 at 12 Noon.
RENEWAL TERM:
This Lease will automatically renew for a term of One Year at the Ending Date unless:
A. Tenant gives Landlord 60 Days written notice before Ending Date or before the end of each Renewal Term
OR
B. Landlord gives Tenant 30 Days written notice before Ending Date or before the end of each Renewal Term.
With is being a gray area to me, I renegotiated the purchase price down to $204,000 to account for the possibility of lost rental income over the year. Once the tenant is out, I plan to renovate the property and increase rent to the market rate which is around $1750/month.
Tim
Congrats on pulling the trigger. What specific question do you have? It looks like both the original term and the renewal term have passed, correct? It appears the tenant should be on month-to-month now. Is there a section of the lease describing that?
Hi Bob,
That's what I was thinking as well. A co-worker of my realtor seems to think it renews indefinitely. I'm leaning more towards the lease being expired and month-to-month. There is nothing in the lease that specifies it goes month-to-month after expiration.
Tim
Nice Work TIM!
Working on getting my gun loaded to start pulling the trigger more often!
Quote from @Tim R.:
It's poorly written and appears to renew for eternity unless you give written notice 60 days prior to termination. If that's the case, it just renewed on July 31st and you're stuck for another year.
I would give the tenant written notice now and let them know you won't be renewing them. Give them the option of leaving early and without penalty as long as they give you 30 days notice.
Congrats on your first deal! How is it going to this point?