Closing a sale with tenants already in place

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Closing a sale with tenants already in place

Robert F.
Member since 2023 · 11 posts · 2 votes

I will be closing on my first duplex at the end of this month. 

Tenants are in both units. Rents are too low. I plan on raising rent for upstairs unit from 750-1000. I've done my research and feel that this is slightly below market price.

I plan to move into downstairs unit once I can get current tenants out. 

Both leases are at the end of their term. The seller/ current landlord has already given notice that they will be approached with new leases upon sale of the property.  However, both leases say they require 90 days notice- see below

Again, I’d like to get the downstairs tenants out asap and raise the rent upstairs asap as well. 

I’ve gotten some opinions already about the 90 days notice , but I am curious to hear what the big pockets experts think. Do I have to give downstairs tenants 90 days to leave and upstairs tenants 90 days at their old rate until I propose an increase?

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
2y

Have the current owner notify them that you intend to occupy the unit and want them out. Your mortgage lender may require you to occupy within a shorter time frame, which may be legal justification for giving a shorter notice. For example, if your lender requires you to occupy within 60 days of closing, then I think you are legally justified for giving the tenant a 30-day notice.

As for the other tenant, I don't recommend keeping them and hitting them with a large increase. They often can't afford it. Even if they can afford it, they may choose to leave. Even if they choose to stay, it can create friction because you're the mean landlord that just increased their living expenses. Any time rent is going to increase more than 15-20%, I recommend you move that tenant out, spruce the place up, and rent it at market rate to a tenant of your choosing.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Robert F.:

    I will be closing on my first duplex at the end of this month. 

    Tenants are in both units. Rents are too low. I plan on raising rent for upstairs unit from 750-1000. I've done my research and feel that this is slightly below market price.

    I plan to move into downstairs unit once I can get current tenants out. 

    Both leases are at the end of their term. The seller/ current landlord has already given notice that they will be approached with new leases upon sale of the property.  However, both leases say they require 90 days notice- see below

    Again, I’d like to get the downstairs tenants out asap and raise the rent upstairs asap as well. 

    I’ve gotten some opinions already about the 90 days notice , but I am curious to hear what the big pockets experts think. Do I have to give downstairs tenants 90 days to leave and upstairs tenants 90 days at their old rate until I propose an increase?


     yes you need to give 90 days. why not have the current owner provide the notice now?

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    Based on the lease you provided, they need 90 days' notice.  Has the tenant indicated if they want to renew or not?

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  • Robert F.
    OP
    Member since 2023 · 11 posts · 2 votes
    2y
    Quote from @Chris Seveney:
    Quote from @Robert F.:

    I will be closing on my first duplex at the end of this month. 

    Tenants are in both units. Rents are too low. I plan on raising rent for upstairs unit from 750-1000. I've done my research and feel that this is slightly below market price.

    I plan to move into downstairs unit once I can get current tenants out. 

    Both leases are at the end of their term. The seller/ current landlord has already given notice that they will be approached with new leases upon sale of the property.  However, both leases say they require 90 days notice- see below

    Again, I’d like to get the downstairs tenants out asap and raise the rent upstairs asap as well. 

    I’ve gotten some opinions already about the 90 days notice , but I am curious to hear what the big pockets experts think. Do I have to give downstairs tenants 90 days to leave and upstairs tenants 90 days at their old rate until I propose an increase?


     yes you need to give 90 days. why not have the current owner provide the notice now?

    Yes current owner has given notice
    0Reply
  • Robert F.
    OP
    Member since 2023 · 11 posts · 2 votes
    2y
    Quote from @Theresa Harris:

    Based on the lease you provided, they need 90 days' notice.  Has the tenant indicated if they want to renew or not?


     Haven't communicated directly with tenants myself. Waiting for appraisal and mortgage before I have a conversation with them. 

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  • Robert F.
    OP
    Member since 2023 · 11 posts · 2 votes
    2y
    Quote from @Chris Seveney:
    Quote from @Robert F.:

    I will be closing on my first duplex at the end of this month. 

    Tenants are in both units. Rents are too low. I plan on raising rent for upstairs unit from 750-1000. I've done my research and feel that this is slightly below market price.

    I plan to move into downstairs unit once I can get current tenants out. 

    Both leases are at the end of their term. The seller/ current landlord has already given notice that they will be approached with new leases upon sale of the property.  However, both leases say they require 90 days notice- see below

    Again, I’d like to get the downstairs tenants out asap and raise the rent upstairs asap as well. 

    I’ve gotten some opinions already about the 90 days notice , but I am curious to hear what the big pockets experts think. Do I have to give downstairs tenants 90 days to leave and upstairs tenants 90 days at their old rate until I propose an increase?


     yes you need to give 90 days. why not have the current owner provide the notice now?

    Chris, 

    Couple of follow-ups. Thanks for your response.

    If current owner has no security deposits in escrow am I allowed to require deposits or renters insurance upon closing the sale?

    are there any other steps that anyone recommend I take upon closing to cover myself?? 
    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y

    Have the current owner notify them that you intend to occupy the unit and want them out. Your mortgage lender may require you to occupy within a shorter time frame, which may be legal justification for giving a shorter notice. For example, if your lender requires you to occupy within 60 days of closing, then I think you are legally justified for giving the tenant a 30-day notice.

    As for the other tenant, I don't recommend keeping them and hitting them with a large increase. They often can't afford it. Even if they can afford it, they may choose to leave. Even if they choose to stay, it can create friction because you're the mean landlord that just increased their living expenses. Any time rent is going to increase more than 15-20%, I recommend you move that tenant out, spruce the place up, and rent it at market rate to a tenant of your choosing.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    1Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Nathan Gesner Disagree with this post as I’ve bought several properties with existing tenants that I’ve significantly increased the rent on and had no problems. Most tenants already know their rent is well below market and that they’ve been getting a great deal.

    Have only had one issue out of about 20 tenants where the tenant is just a problem anyway and makes constant remarks about how expensive the rent is despite it still being at least $200 below market. You just can’t make everyone happy.

    1Reply
  • Rick BassettBusiness Member
    Property Manager · Greater New Haven, CT · Member since 2010 · 377 posts · 434 votes
    2y

    @Alecia Loveless many of the towns and cities in Connecticut have these things called Fair Rent Commissions.

    If you raise the rent too much and the tenant brings a complaint to their local Fair Rent Commission. They have the authority to receive and investigate rent complaints, issue subpoenas, hold hearings, and order landlords to reduce rents for specific reasons.

    It is better for us to move the tenants out whenever we take over a building that has rents that are way under market.

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  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    2y

    @Robert F. Make sure your mortgage doesn’t require you occupy within x days as that could become very problematic if you can’t comply. Maybe cash for keys on the one you’re planning to move into? But if they have nowhere to go, they may not leave and you’d be looking at 90 days notice then time for eviction. Some states allow breaking a lease for owner occupants but some do not. Your agent should have advised a due diligence period to review info on leases, security deposits, rent history, etc., and that one unit would be vacant by closing if using an owner occupant loan. If not, ask your lender what it would take to move forward with an investment property loan in case that’s the way you’d need to go, then find alternative lodging until one is vacant.

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