I inherited some problem tenants from a rental property I recently purchased. I closed at the beginning of the month, we talked about bring their rent up to market rents, and then they went on vacation. Their current rent is about 25% under market. When they return, they ask us to confirm that we are increasing their rent then they say that we must give them 30 day written notice of any rent increase. Their previous lease had been terminated by the seller. Do they have any grounds? There is no contractual relationship between the tenants and me, correct? I have a right to charge the market rent, is that correct? Because they insisted, I lowered my first month's rent as a gesture of goodwill but I feel like I've been cheated just because they are being stubborn. She comes back from vacation and then tells me she cannot afford an increase of $105? Really?
Who is in the right here?
Never try to increase the rent on tenants who are in the home. It never works out in your favor. You only increase rent once they move out. If you are having these issues this soon then there were these issues before you purchased it with the previous owner and they most likely didnt tell you about them.
If their lease was terminated by the seller then why did you close on the home and put yourself in this situation?
Jason although it depends on your lease, it probably went month to month unless they are truly not on a lease. If they are not on a lease you need to get them on something ASAP.
Personally I don't "discuss" rent increases. I usually give them 3 choices (although I have never inherited a tenant
1) $100 increase for 12 months
2) $50 increase 24 months'
3) $300 increase for month to month
Along with a reminder that if they don't renew their lease they need to give notice. Again it is a notification not an "discussion".
The real answer is the dreaded "it depends". Some if not all states consider a tenant living in a property without a lease to be monthly tenants by default. Then there is the question of how much notice your landlord laws (state and/or local) require for a monthly lease. My guess is that the tenants are correct, that is a normal amount of notice. In writing. Another issue to check into is rent control. Is there a legal limit on how much you can raise the rent of an existing tenant?
They came back from vacation, and then can't afford $105 per month? How obnoxious. Just because they saved up and scheduled that vacation for a year, how dare they say they can't afford to pay you the amount you demand! In other words, there is another side to that.
I disagree with @Curt Davis about not raising rent on an existing tenant. Price increases are part of any profitable business. But so is knowing when and how to do so.
Raising the rent by $105 per month sounds like a pretty high percentage no matter what they are paying. Even if you can do so legally, do you really think that is a reasonable amount at one time? I would put them on a month to month contracted lease, with your rules, and not raise it the full amount at this time. Find out if they are good tenants, bad tenants, or average. Why screw over potentially good tenants? If they turn out to be good tenants, raise it by a reasonable amount once a year. If they are bad, the month to month lease lets you get them out whenever you decide it is necessary. And if that happens, you can raise the rent to market level.
Did you know they were "problem tenants" when you closed? If so, next time you can make sure it's part of the contract that it's vacant at closing. If they are just "problem tenants" because they were decent tenants, but after closing you came to them and said, "Hi, new owner here, I'm raising your rent over $100 per month with no written notice, Have fun on your vacation," then if I were your tenant, I'd now be a problem tenant, too.
Step back a bit and figure out if you want a turnover there right now, if they have paid timely and no complaints during their lease term (last owner should have given you the deposit, applications, any leases they signed for him, rental history of late payments, etc.). If you have none of this, 1) you could still be required to refund their security deposit when they leave, whether or not the owner transferred it to you, and 2) since there is currently no written lease in place, you could require screening, credit and background, employment, etc., as if they were new applicants. If I didn't want a turnover right now, I'd probably let them continue month-to-month at their current rent as long as they agree to application and screening, make timely payments and aren't damaging the place.
Read your landlord/tenant laws as you will likely have to give them 30 days' written notice of any rent change.
And keep in mind that a "vacation" might consist of visiting a family member & helping them build a deck. Or camping at a state park for a week. Or a lot of other things that don't involve a lot of money.
So if I understand this correctly, you purchased a property with tenants in place that have an expired lease (now month to month). You seem to have introduced yourself and said you were going to raise the rent right away. You then graciously let them have that month at the old rate. Now you spoke with them again and confirmed you want a higher rent and they had the audacity to ask you to comply to your state laws? Now you are looking to see how to get this money out of these trouble makers?
Sounds like you are really just winging it. These tenants are completely legal and you are at the disadvantagr because you do not have a lease with them what so ever. So your tenancy follows the state laws which favors the tenants more for exactly the reasons displayed by for your behaviour. You have not done any improvements or repairs to the property from the way it sounds. You just determined that you should get another $105/month in order to hit your nunbers or you just want to. If I wete in your shoes, I would set up a meeting with the tenants. Inform them that you were out of your depth and have sincedone some research. Hand the tenants and application so you can have the required information. Then hand them some sheets of paper and encourage them to inform you of any and all problems with the property. Let them know you might not get to everything but you want to be partners in providing them a quality home. If you have evidence that their rent is undermarket for a comparable property in its condition, you can present this information. Then state that you will not be raising the rent and would like to sign them up for a 6 month lease to lock them in for that rate. During that time you will prove your servuce and value to them. You will tackle deferred maintenance and make some improvements. Then let them know that if the data does look similiar in 6 months and you have made improvements to the property you will be raising the rent a resonable amlunt but still providing them the best value in the area. Then perform....
@Jason Fang Welcome to Bigger Pockets! As you will find much sound advice and some crazy ideas here, the good news is that this is a place where you can find support. I hope you keep an open mind. We are sometimes blunt with a visceral reaction. We sometimes are candid and express our opinions and feelings in an honest and sincere way. Not with the intention to offend. We sometimes joke around a bit. But we are here for each other.
The title of your post and how you state the situation shows me you are pointing the finger at the tenant. As I see it, the problem lies in your approach. You need to know landlord-tenant law better than the tenants do. You need good procedures in place. How you interact with your tenants matters, as Landlording is a people business. A service attitude goes a long way. There are some really good forum topics about what to do when you purchase a property with a tenant in place. I recommend you do a topic search on BP and find some of those threads. @Steve Babiak is good at finding topic threads from the past, perhaps he can help here.
Texas law will treat those tenants as "tenants at will" if rent is up to date. If you have no written lease, consider them at-will.
I think you will need to give 30 days notice for tenants at will. Read chapters 91, 92, and 24 of Texas Property Code.
You need a better plan next time around. Remember that you have folks living in property you likely put a hefty sum of cash int- they can cost you way more than you'll ever get in a rent increase. I'm not saying you can't raise rent, but do so with sufficient notice and in a way more constructive than your initial approach. Advance notice is always your friend as many tenants live paycheck to paycheck.
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