Boot Month-to-Month Tenant
Hi BP Community. For those who have ever been in the situation on booting a month-to-month tenant to remodel unit and rent for more cash, this question/situation is for you :)
I currently have a side studio to my single-family home that is being rented out for $700. The tenant has been there for 5+ years and has never been an issue and always pays on time via Zelle. She was the previous owners friend. And if I bump rent +$150, I do not think she will go anywhere and accept to stay because of convenience to her mom and work.
Due to my 2-1 buy down, on April 2024, my mortgage will be going from $2,546 to $2,803 and then to $3,071.25 in April of 2025. That amount includes Principal, Interest, Property Taxes, Home Insurance, and PMI. I currently cashflow, $50 on the full property (3bed-1bath + separate entrance studio) with the $2,546 mortgage payment but will not be able to once April 2024 comes up.
So if I were to put ~$12K worth of renovations to the studio (new kitchen counter tops, cabinets, furniture, paint) and based on my research, I should be able to rent the place to a mid-term renter for $1,000-$1,300 per month (+$300-$600 more than what it is now).
So based on my situation, these are the current option I am thinking of:
a) Lowest Level of Effort: Bump my tenant's rent by $150 with no renovations or value adds to the unit. This will leave me at negative ($107) cashflow per month.
b) High Level of Effort + Vacancy Risk: Perform the remodel (I already have a trusted contractor) and find a mid-term renter which is very obtainable given the B+ location of this property in Florida.
Which route would you take and why?
Thanks,
AJ