Malden, MA · Member since 2016 · 45 posts · 10 votes
Ok, so we have found a property. It looks good on paper and in person, however, the one unit has a tenant that was once the owner of the property and since has been renting it. They would like to stay after the property is sold. All the units are way under market, and need to be increase to make the property worth it.
Should we consider letting the tenant stay, or is it better to start with a new set? What experiences has anyone had with this type of situation and what would you recommend knowing what you know now?
CPA · Rochester, MN · Member since 2016 · 48 posts · 51 votes
9y
Without knowing anything else about this tenant, I think you need to prioritize the numbers first and communicate that up front to the tenant. "Hey, just letting you know that we anticipate raising the rents up to $$$ per month. I hope that works for you, but if not, start considering other options or reach out to me with any questions."
Maybe they'll want to converse with you and try to make a case why they are an amazing tenant, plus they know the property and can help out. Who knows? And as Michael Swan said on a recent BP podcast, "When you get an amazing tenant, you should treat them like royalty" (not an exact quote, but close). That could be quick response time, more money spent on them by choice, or less rent demanded from them.
But if there appears to be nothing special about this tenant, then stick to your numbers, because the math matters a lot. It doesn't matter if the tenant used to be the owner before the current owner selling to you.