Real Estate Investor · Suquamish, WA · Member since 2013 · 24 posts · 8 votes
What is the procedure in this scenario?:
I'm closing soon on a duplex with one existing tenant. The rent for this particular unit, according to my research, is severely below market. I want to raise it by $250. What is the procedure for this?
By law, do I need to give the tenant at least 30 days notice?
Do I terminate their existing month-to-month rental agreement on the day I get the keys and put into effect my new rental agreement with the rent increase?
I'm not too concerned with vacancy because this particular rental market is pretty hot right now. I filled the other unit pretty quickly. Any thoughts you can share will be greatly appreciated!
I am in the middle of this with not one tenant, but about 35. I purchased a building that was a LIHTC building but it lost that status on the foreclosure when I bought it. For any tenant on a month to month we gave 30 days notice and bumped them $25 and left them on a month to month lease, then 4 months later we did it again. Over the last 8 months we have lost some tenants and replaced them with market rent ones, and others have just paid the higher rent because they like living there. By sometime later this year the whole building will be market rents.
Luickily Ohio doesn't have any laws that restrict how much I can inccresase rent. I just have to abide by any leases currently in place.
In your case, if there is no law governing max rent increases, and you aren't worried about vacancy, and the tenant is on a month to month, then by all means give them the appropriate notice and then increase the rent and get them to sign a new lease. Also, as @George Paiva mentioned, you may want to see what kind of a tenant you have before deciding if you want to renew their lease or not.
Ask the seller if you can post notification now of your intention to raise rents or vacate. Then when u take possession have them sign a new lease at your desired price.
Thanks Samson Kay I didn't know you could do that. It may be a little too late for me to do that though. I should be signing the paperwork tonight or tomorrow. Do you any other suggestions after-the-fact?
If I were you, I'd check with someone on your local Landlord/Tenant Laws, because I am not confident that your purchase of the property circumvents the Tenant's rights provided for in their valid lease. It is definitely a state by state matter, but please know that in many states, the Tenant could win that one if they press the issue. The other way to handle it is to have the seller deal with it before you close, or as a condition of close, assuming your local statutes allow such an amendment to survive close of escrow.
Also, make sure the tenant deposits are made part of your escrow close.
Robert Wenger and Bryan Scott thank you for your responses; I'll keep what you said in mind. I think I'm going to have a discussion with a local real estate attorney so I don't slip up anywhere.
In my area the new purchaser must honor the existing lease. If no lease exists a month to month lease se is assumed. Look at the lease. It will guide you in the absence if state or ocal laws that would trump it.
In my area and for my lease, I would give 30 days notice.
Note: I'm not a lawyer, this is my best guess, not legal advice
As others suggested let the lease run out then increase the rent.
I would also vet out this tenant like you would any other tenant to see if they are worth keeping for the longer term. If so, I wouldn't increase $220 in one setting, instead I would go up $110 then 6 months or 1 year later go up another $110.
I am in the middle of this with not one tenant, but about 35. I purchased a building that was a LIHTC building but it lost that status on the foreclosure when I bought it. For any tenant on a month to month we gave 30 days notice and bumped them $25 and left them on a month to month lease, then 4 months later we did it again. Over the last 8 months we have lost some tenants and replaced them with market rent ones, and others have just paid the higher rent because they like living there. By sometime later this year the whole building will be market rents.
Luickily Ohio doesn't have any laws that restrict how much I can inccresase rent. I just have to abide by any leases currently in place.
In your case, if there is no law governing max rent increases, and you aren't worried about vacancy, and the tenant is on a month to month, then by all means give them the appropriate notice and then increase the rent and get them to sign a new lease. Also, as @George Paiva mentioned, you may want to see what kind of a tenant you have before deciding if you want to renew their lease or not.
BTW Marc I hoped to have a great video of my last eviction like you had by having stuff thrown down the stairs but unfortunately there only was a couch and a entertainment center left by the tenant as they skipped town in the middle of the night. Also damn marshal didn't call me when they got there so I didn't get time to get a video going. Oh well next time...
Congrats on getting your building up and running. Many fail to realize how you have to take a long term view into buy and holds. I commend you for aproaching it in a phased manner.