Inherited Tenants who recently signed year long lease agreements

[Derick Hanna]

Hey guys, we are closing on our first real estate deal this week. It is a 4-plex and we will be living in one of the units and renting out the other 3.  We inherited 3 tenants. All 3 tenants signed year long leases about a month before we put in the offer on the property.  We intend to self manage and are unsure about what we can do when it comes to new rules, or payment systems (we want to use avail), etc.  Can we make a new lease agreement and have them sign it?  I am assuming the rents cannot be raised until their previous lease expires, but can we change other things?  We are fast approaching closing and I don't know the best way to make this transition.  They all have newly signed lease agreements with the previous owner...and now we own the property. What is the hand off process like?  Any advice on this issue would be greatly appreciated! Thank you.

[Chris Seveney]

Quote from @Scott Trench:

This happens all the time. For some reason, landlords sign their existing tenants to long term leases right before selling the property, and often at below market rates.

I thank these landlords. They just lowered the value of their own property for me right before putting it on the market. 

What you do here is honor the leases, but offer them a no fee lease break if they want to move out early, and their security deposit back (especially if you plan to remodel the unit after they leave).

Then you wait, and make it clear that rents will more up to market when the lease term ends. this gives them plenty of time to opt in or out.

Great points. I love the ones though that sign people up recently for $1,000 month then say market rent is $1250 so you can increase rents and are attempting to sell it off the $1250/mo. If it can get $1250 then why are you not getting it. They do look flabbergasted when I tell them i do not care what i "may" get.