Acquiring duplex w/ tenants

[Brian Jamieson]

I'm about to take control of a multifamily that's currently rented month to month on both sides well below market rent. Currently paying 900 and 950 and expected rent is 1700-1800, double their rent now. 

I already have to kick one out so I can live there for the mortgage, should I remove the other too and fix the little things or should I raise the rent with a signed lease? I feel like I should start fresh and vet my own tenant. Should rent fast.

[Brad Jacobson]

Hi Brian,

If the lease is still in the original term, you can't do anything with it until the term ends.  However, if the tenant is month-to-month, you do have the option to remove the tenant and start over.

My favorite go-to strategy in these situations is to offer the tenant rent steps if they've been a good tenant.  If current rent is $900, pose as the property manager and let them know the property will soon be leased out at $1,700.  If they'd like to stay, give them the option to have rent raise $100/month every month for eight months until they're at market rent.  Use a new lease to do this.

That way, if $1,700 is too big of a burden, they can stay in the property a little longer, with only slightly higher rent, while they locate a new property.  And if they can afford $1,700, I think that's the most sensical way to allow them to ease into it while still protecting your bottom line.

Good luck!