getting rid of a good tenant

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getting rid of a good tenant

Sofia Duque
Member since 2022 · 2 posts · 1 vote

I have a really good tenant that i inherited, always pays on time, fixes things here and there at the place, is very nice... his lease is up oct 1 and i have someone else willing to pay $900 more... i dont want to ask him to leave but i just dont think i'll get another opportunity like this again. has anyone been in this situation of having to get rid of a good tenant? it's somewhat heart wrenching

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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y

First of all, you can not remove a tenant in the middle of their lease if they have not violated it. Second, if it sounds too good to be true, it probably is.

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  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Sofia Duque:

    I have a really good tenant that i inherited, always pays on time, fixes things here and there at the place, is very nice... his lease is up oct 1 and i have someone else willing to pay $900 more... i dont want to ask him to leave but i just dont think i'll get another opportunity like this again. has anyone been in this situation of having to get rid of a good tenant? it's somewhat heart wrenching

    It's a business. Sorry, but you have to take the highest bidder or perish. Tell the current tenant, in person if possible, that you have a new offer that is $900 more and let the tenant be the one who decides if he will match that or leave. Give him a few days to think it through.
    3Reply
  • Henry T.
    Member since 2022 · 1k+ posts · 1k+ votes
    3y

    A bird in the hand is better than two in the bush. Make sure you've vetted your new guy and have a new lease ready to be signed, with a deposit. 

    I would not tell your guy that someone else wants it. I would simply tell him you need to increase the rent $900. None of his business why. Otherwise, your good guy might torch the place on the way out.

    8Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Henry T.:

    A bird in the hand is better than two in the bush. Make sure you've vetted your new guy and have a new lease ready to be signed, with a deposit. 

    I would not tell your guy that someone else wants it. I would simply tell him you need to increase the rent $900. None of his business why. Otherwise, your good guy might torch the place on the way out.

    If he torches it, you get a brand new building, courtesy of the insurance company. Nice!
    0Reply
  • Andrew FreedBusiness Member
    Investor · Worcester, MA · Member since 2020 · 1k+ posts · 1k+ votes
    3y

    @Sofia Duque - I would attempt to keep the good tenant by raising rents close to what you can get to market. If he can come up another $700 bucks a month instead of $900, it might be worth keeping the current tenant in place. Especially if this person has a history of staying at the property a long time hence lower vacancy. If they cannot come up closer to market, sorry its simply business and they will need to find a new place to live. 

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    10Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    3y
    Quote from @Sofia Duque:

    I have a really good tenant that i inherited, always pays on time, fixes things here and there at the place, is very nice... his lease is up oct 1 and i have someone else willing to pay $900 more... i dont want to ask him to leave but i just dont think i'll get another opportunity like this again. has anyone been in this situation of having to get rid of a good tenant? it's somewhat heart wrenching

     @Sofia Duque, it sounds like you found someone who DESPERATELY needs a place BUT can also afford to PAY THRU THE NOSE for it. That likely means a very temporary situation. So, you will make better money for several months or a year and then be looking for another tenant paying nearer to what you were getting before. 

    Maybe its worth it to make the money for a year, but I don't consider making an extra $10k a once in a lifetime kind of opportunity especially when I'll have to deal with 2 turnovers a disgruntled tenant etc. Yup, its good money for the aggravation but hardly winning the lottery. 

    8Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Sofia Duque:

    It's simple math. He's doing some handyman thing around the property, but he's $900 below market (maybe more).

    Think of it this way: you are paying him $900 a month to do a few fix-up things. What if he paid rent and you hired a contractor at $50 an hour to fix a few things? Do you think your tenant is doing 18 hours worth of work each month?

    You are losing money, probably thousands of dollars every year.

    The person offering you $900 more a month may still be below market. Figure out what your rental is worth and then offer it to your existing tenant at a price within 10% of market rate. You'll earn an extra $10,000 or more a year! If he stays, you win. If he leaves, you put it on the open market and find someone willing to pay you what it's worth.

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    5Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    First of all, you can not remove a tenant in the middle of their lease if they have not violated it. Second, if it sounds too good to be true, it probably is.

    11Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    I'd talk to the existing tenant and let him know market rate has gone up.  If he's willing to pay the higher price (or even close to it), I'd let him stay.  

    Why is the other person willing to pay almost double the rent?  Is that really market value and you never cared before or is this higher than market value in which case something is fishy and I'd say no.  I'm betting the latter.  No way you'd have let the rent stay that far below market value.

    3Reply
  • Corey ConklinPro Member
    Investor · Member since 2021 · 129 posts · 209 votes
    3y

    @Sofia Duque There is some critical information left out needed to make this decision. 

    Is $900/month rent upcharge reasonable or at market rate? Have you thoroughly vetted the new tenant?

    If the answer is 'no' to these questions I would be cautious. When I get people that say something similar to the following I find it a major red flag and always proceed with extra caution.

    "I'll pay $XXX over what your are currently asking"

    "I have cash in hand"

    "I'll pay 3 months, 6 months, full year rent in advance"

    These are often tactics that historically bad tenants use to get your guard down so you don't do your due diligence. 

    My philosophy is to always try to retain tenants who have proven to be a good tenant. You should let your current tenant know that they are well below market rent and that you need to raise the rent. If what you are asking is reasonable they will more than likely stay.

    At the end of the day you get to choose how you want to do business. If you are focused on making maximum profit then that's what you do. I would caution that numbers on a spreadsheet aren't always how you determine maximum profitability. As a landlord you are in the people business. If you treat people like dirt, you often get mud on your face.

    7Reply
  • Marcus R.
    Real Estate Agent · Denver CO · Member since 2019 · 210 posts · 333 votes
    3y

    I'm with @Corey Conklin on this one.

    At face value, sure take the add'l $900 and swap tenants.  But the devil is in the details and there might be some bad details behind their offer.  Do your due dillegence!

    3Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    3y

    In order for anyone to give you a slightly informed opinion, we'd need to know: 

    1) Current rent.

    2) Market rent.

    3) How long has the current tenant been there and were there any rent increases.

    4) Did you run your background check on the prospective tenant.

    5) Has the prospective tenant actually seen the place and if so, why are they so eager to move in.

    6Reply
  • Patrick M.
    Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
    3y

    I think the problem with giving advice is there are people on the site who treat this as a business and those that don't or wing it. 

    If it was my business my unit would never be below market $900. And if that was just a very generous offer by someone who needed a place- I would tell him "no thanks." I have had people offer more when I chose another tenant or offer to pay for a year. Each time I was glad I went the other way.

    My business is my buildings- I don't let a tenant "fix" anything. Besides their workmanship, I never want them to think that I owe them anything except what is in the lease. We both have only one job- fulfil the terms of the lease. That would also be the case with a SFH. Again, if you are winging it and just in the game to break even and hope the property appreciates (astro-friggin-nomically to turn a meaningful profit), then I guess you see it differently.

    While I think that in the past you could have benefitted from a mentor, perhaps your best move is to get a property manager. +$900 tenant is going to want that unit humming perfectly and you sure as shinola aren't going to have them doing the work to keep it habitable.

    2Reply
  • Timothy Howdeshell
    Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes
    3y

    Make sure that you are comparing apples to apples! Is the prospective tenant well qualified and financially capable as well as low drama? If so, you should probably move forward with price increases. It is not worth $900/month for maintenance. 

    Now, if the property is in such disrepair that you need lots of maintenance every month, are you sure that the actual rent is $900 more? Meaning, would this new tenant want to move in if you told him that everything breaks every other month? 

    Odds are you need to get a new tenant though. Just tell the currant that you love having him, but that the market rent has increased substantially. As a business, you cannot afford to take a $900/month loss on rents. Given your good relationship though you would like to offer him a discount of only $700/month increase, and he doesn't have to do anymore maintenance, if he renews. If not, no hard feelings. 

    Real estate always works better when emotions are set aside. 

    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y

    So many holes to O.P. that I have STRONG doubts of it's legitimacy. 

    First, why would anyone have pitched to rent this place? If there is an existing tenant in place who is so "good", where did this person come from? How did they have landlord contact info? Was property being marketed? Why? 

    The list of questions goes on and on, none of it makes any sense. I am not buying it, I call shenanigans. 

    2Reply
  • Eric Gerakos
    Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
    3y
    Quote from @James Hamling:

    So many holes to O.P. that I have STRONG doubts of it's legitimacy. 

    First, why would anyone have pitched to rent this place? If there is an existing tenant in place who is so "good", where did this person come from? How did they have landlord contact info? Was property being marketed? Why? 

    The list of questions goes on and on, none of it makes any sense. I am not buying it, I call shenanigans. 

    Yes, shenanigans and a healthy dose of tomfoolery thrown in for good measure.
    1Reply
  • Account Closed
    Rental Property Investor · Indianapolis, IN · Member since 2020 · 562 posts · 554 votes
    3y

    @Sofia Duque make sure to thoroughly vet the new tenants. Call references, run credit checks etc. As someone else mentioned, if it’s too good to be true, it usually is.

    0Reply
  • Sean Walsh
    Rental Property Investor · Denver, CO · Member since 2021 · 17 posts · 15 votes
    3y

    Before you start heart-wrenching, let your current tenant know that the monthly rent is going to $X and you would love for them to stay. Never make assumptions about a tenant’s finances. He likely knows he’s paying less than market rate and might very well be able to afford the increase. I agree with a lot of what other posters have said : 1) remember it’s a business transaction; 2) don’t tell him you have someone willing to pay lots more; 3) make sure to follow the terms of your lease (if there is one) and 4) conduct due diligence to ensure Mr. $900 is legit.

    0Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    3y

    @Sofia Duque one thing I would add is if the $900 more puts the place over market rent I would consider the offer suspect.   There is something that the prospective tenant is hiding or there is something really unique about your property that meets their needs. It is one of those things because no one pays over market rent like that without a reason. If the $900 more is market than you dropped the ball on increases.

    1Reply
  • Craig Janet
    Member since 2019 · 223 posts · 261 votes
    3y

    So some random person offered you $900 more than you're getting now? What could go wrong? How much is it renting for now? 

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    3y

    We don't need to make a trade off between "good residents" and market rates...you can have both.

    Separately, a resident is not good if they are paying $900 below market rent.  This assumes that the new rate is market.

    0Reply
  • Brian M. AdamsPro Member
    Member since 2018 · 20 posts · 6 votes
    3y

    So I am going to be a bit contrary to what most others have said. Yes. it is a business, but it is a people business and good relationships are important.

    Do the current numbers work? Is the current rent making a profit? If so, then I say why rock the boat? As another mentioned, a bird in the hand is worth 2 in the bush, and if the current tenant pays on time and the place makes a profit, then that might be worth a little less income knowing it is going to be there each month.

    If it isn't making a profit, then a discussion needs to be had wit the tenant about the need to increase the rent, but also that you want to keep them in the place if possible. Unfortunately, it may not work out that way, but hopefully it will be an amicable split when they move out, one where not only can you provide a good history and reference if needed, but also where they don't feel the need to attack your business and potentially damage it long term.

    JMHO

    1Reply
  • Sunny Rajvansh
    woodbridge, CT · Member since 2016 · 27 posts · 6 votes
    3y

    @Sofia Duque

    Is your current tenant paying actual market rent for your property? If he is, then the other person willing to pay $900 more sounds too good to be true. You need to be very thorough on details. Why is he willing to pay so much more than actual market rent. Do proper background check to make sure he/she is willing to pay not because no one else would rent him/her.

    If your current tenant is paying around $900 less then current market rent, you definitely need to find a way to increase your rent. If that's the case of course any tenant will do some fixes themselves, knowing they could be paying so much more rent for a place similar to yours. And if that's the case you should give tenant advance notice to vacant and then rent your property with current market rent. Unless current tenant would pay $900 more rent.

    0Reply
  • Todd Jones
    Member since 2023 · 243 posts · 199 votes
    3y

    I’m in agreement with several replies but as you can see from everyone ‘s replies, more data would help. 
    Is $900 20% or 40% more than the current? How does the current tenant’s rate compare to the market? You can find out via Zillow. Did you investigate this tenant?

    I agree with @Kevin Sobilo and the others. They may stay a short while. That extra $900/mo may be eaten up quick once they leave early unless it’s not a month to month.

    As with everyone, how did this person approach you about your property?

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y

    In my market the average 3/2 SFH rent has increased $700/month in the last year (source Rentometer). How much have your rents gone up in the last year? What is market rent? What is current tenant paying? What is new perspective tenant stating they will pay? Have you vetted the new perspective tenant?

    People can say what they want.  Until you have a signed lease it means virtually nothing. Make sure you understand why the scenario you describe has happened.

    If the prospective new tenants are offering over market rate, there is a reason.  A bankruptcy, an eviction, horrendous credit score, etc.  

    if the prospective new tenant is offering market rates and current tenant is paying way below market rent, then you have dropped the ball.   You should consider hiring a PM to optimize your return (bonus it should also reduce your work load).

    Good luck


    0Reply
  • Vicky L.
    Investor · Simi Valley, CA · Member since 2019 · 46 posts · 35 votes
    3y

    Have you counted the cost of a turnover? Deep cleaning, cleaning or replacing carpet, fixing the walls and painting them, etc?

    0Reply
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