I recently purchased a duplex that is fully occupied, that I now intend to move into in the near future. I am having a bit of a hard time figuring out which tenant to keep and which to get rid of.
My initial plan was to build a garage on the property with a third unit atop that I would move into when it was inhabitable. Zoning is proving to make this not a possibility, so now I am planning to move into one of the units and build a standalone garage.
The duplex is an upper/lower split, both units in need of some heavy renovation but making good enough money as they stand now that the purchase was a good deal. The upper unit is on a year lease that is up at the end of June, the lower unit is month to month and has been there for several years now.
Currently, I rent an apartment, and moving into one of the units will still be a net positive because I'm losing less rental income from the loss of that unit than what I pay for my place now.
I feel like the most gentle approach would be to approach the lower unit tenant about my intentions and ask if he is interested in moving out, and if he isn't then giving the upper unit plenty of advance notice that their lease would not be renewed come the end of June.
The more immediate approach would be to give the bottom tenant (longer term, month to month) 60 days notice that his lease was going to be up and move in there as soon as he is out.
Any advice or suggestions?
Hello Eric Thompson with a 'p'. Congratulations on your purchase and your awesome name. And welcome to BP. How long has your upstairs tenant been leasing there? It sounds like your downstairs tenant is a good long term renter. If it were me I would approach them first about their intentions, like you suggest, and see if they are willing to sign at least a 1-year lease. You could even offer to lock him in at his current rate if he does (or however you want to work it out). That sounds like the tenant I would go after first, plus if he ever does move you have a downstairs unit available which may be easier to lease (not that you couldn't move to the upstairs unit once that one left if that's the path you take). If he doesn't want to sign a long term lease then that would be a red flag to me that he may not be planning on sticking around. If he does then great! Good luck!
Thanks for the response, Eric Thomson without a 'p'! Haha.
Upstairs has been there since June of last year.
I do plan to occupy and renovate both units at some point, in whichever order is most convenient.
I just had the most gigantic "duh" moment when I realized that the difference between delivering a 60 day notice to the downstairs tenant vs running out the lease on the upstairs tenant is a total of 60 days. Not that big of a deal! I think I will propose it to downstairs and see if he wants to get out, if not, no problem waiting an extra 60 days.
@Eric Thompson just to confirm, you did not buy this property as owner-occupied, correct? If you did, I believe you're supposed to move in within 30 days, and if your lender finds out you're not living in it, you could be in a world of hurt. Just something to be aware of when making your decision.
I just would choose the unit that I want to live in. And if you do end up with the upper unit, have the MTM's sign a year lease as the last thing you need is move into the upper, start a project and have the lowers move out three months later. And to Kimberly's point, not sure how the lenders would find out you aren't living there. Just put up a mailbox at the property. No "tsk tsking" me. It's a rule breaker but I doubt any of us are in the landlord businesses because we are rule followers. LOL.
As a past Chicagoan I must say I like the way you think. LOL
I bought it with an investment loan, so no worries on the lender. I'm actually looking forward to refinancing after I move in and getting a lower rate with an owner-occupant loan.
Which unit is the lowest below market rent? The next would be who is the cheapest. I am cheap and growing my "empire". So I would take the cheapest unit for myself renting out the most expensive one!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing