Thoughts on this opportunity? Long-term below market rent tenant

[Ryan Jones]

Hello,

Currently in position to lock in an all-cash offer on a condo- today! Plan is to pay cash using savings and etrade LOC and then refinance/cash out when mortgage rates are lower. Until then, will pay down the LOC aggressively.

Good price on home (~25% below original list price 45 days ago). The thing is - the current tenant has been there for 6 years which is great but the rent they pay is ~4-500 $/month below market. I can raise it to be ~3-400 $/month below market.

With aggressive LOC paydown, I could be cashflow positive in ~9 months for reference.

What do you think? Worth locking in a property with long-term value if willing to cover costs for the short-term? I will admit, although this isn't my first home purchase, this would be my first time paying cash, first time using my LOC so there are some nerves involved.

[Nathan Gesner]

Quote from @Ryan Jones:

Many of us start off buying properties that are rented below market. We accept the risk because we believe the numbers will improve when we spruce up the property and rent it at market rates.

My suggestion is that you grab the bull by the horns instead of *****-footing around to avoid hurting feelings. The current renter is well below market. Even if he can afford the increase, there's a good chance he'll resent it and cause problems for you. You're already considering keeping him at $100 - $200 below market, which demonstrates you are operating on emotions and not with a business mindset. The best option is to terminate his lease, clean the place up, and rent it at market price.