Keep existing tenants on new house hack?

Question

Hey Biggerpockets community,

I purchased my first live in 2-flat in Chicago this past December and became a first time landlord. I live in one unit and the other unit was already occupied, with that tenants lease expiring June 2022. I am debating whether I should keep the existing tenants and renew their lease, or go ahead and screen and find new tenants once theirs expires.

So far, they have paid rent each month within Chicago's allowed 5 day grace period of rent due date, and have not given me any trouble other than some loud music from time to time. One of the tenants let it slip that she was happy the previous owner took them as tenants because they had a hard time finding a rental due to their poor credit score.

Im thinking of renewing with a month to month lease option as a way to give me a bit more flexibility. Any advice would be great! Thank you

Jonathan Klemm · Answer

Hey @Bryce Renicker - If you haven't had any trouble with them and they are paying their rent, why wouldn't you lock them into another year lease if they want to stay?  I feel like going month to month in your situation could hurt your more than help you.  If for some reason they decided to move out in the fall or winter it's much more difficult to rent apartments for top dollar here in Chicago.

Maybe you increase the rent $25-$50?

Also, sounds like they are grateful to be there so why disrupt that,....maybe keep paying it forward.  What goes around comes around.

Paul De Luca · Answer

@Bryce Renicker

It sounds like they're solid tenants. If they're already paying market rent or even a little below I would try to keep them. Turnover costs can be time consuming and expensive. A low credit score is an indicator of fiscal responsibility but not the only determining variable whether a tenant is good or not. Also their credit score may have improved since the owner rented the unit.

If their rent is quite a bit below market and you'd like for them to stay, let them know you'd be interested in having them stay but you will be raising the rent to market. If they don't want to stick around, no problem. Just advertise the unit at market rent and move on.

Funsho Adesanya · Answer

If they are paying at current market rate, I'd lean towards keeping them. You can note in your lease renewal the cutoff time for loud music and other stipulations you'd like to enforce as their new landlord. Otherwise if you do not renew them even though they are paying market rate, you'll have to spend money and time to get the unit ready for a new tenant. That could easily be 2 month of no rental income. Now if they are currently below market, then it'd make sense to look for a new tenant that'll pay the market rate.

John Warren · Answer

@Bryce Renicker I am at 114 units and counting, and I have never been able to screen any tenants we inherit. Many are wonderful tenants, some are just so/so, and some we have to part ways with. I generally try to see how they behave the first year, and if I have no issues I don't think about it again.

Bryce Renicker · Answer

Thank you for your reply. Thats a great idea to add noise clauses in the new lease and I like your point about losing income during turnover. Thank you for the advice!

Bryce Renicker · Answer

Hey Paul! Thanks for your reply, I think thats great advice.The rent is close to market and could be raised a bit. I like this idea a lot and I agree that credit score is not the only factor. Im leaning toward keeping them at this point, thanks for your advice!

Bryce Renicker · Answer

That’s awesome, good to hear that you have been through it and it has worked out well. I like that mindset and I think I’ll treat it the same way. Thanks for the reply!!

Michael Brattelli · Answer

@Bryce Renicker I’m in a very similar situation. Mine are not quite at market rent but pretty close and didn’t get to screen them prior. They pay on time every month and dont bother me. I’m tetering on giving a small increase $50-$100/mo and renewing them on a month to month. At the end of the day vacancy and turnover will cost you more. My advice is judge them on their actions/ on time payments and not what you may have missed in the screening process with their credit score. When they do decide to leave touch up the place, screen well, and raise it to current market rents. Good luck

Keep existing tenants on new house hack?

Most Popular Reply