Inheriting Tenants

9 Replies

Hello all!

We are closing on a new duplex at the end of this month, and one of the units is currently occupied.  The tenants there are on a month to month lease and are paying a couple of hundred dollars below market rent in the area.  We would like to raise the rent to the market rate and get them on a 6 to 12 month lease.  Also, we like to do background checks, credit checks, income verifications, etc on all of our tenants, and we don't have that information on them.  I think they are a little worried about having new owners, and so, we may need to be very diplomatic in our handling of them.

Do any of you have any advice on dealing with preexisting tenants?  Thank you in advance!

Are you planning on making any improvements to the property?  That's a good time to raise rent.

Also, you could ask the seller to raise rents before close.

We take our application and revise the title to "Resident Update".  Run it like you would an application, but it's less threatening to the tenant.  It becomes a "getting to know you" instrument.

Don't wait to raise rent.  They expect it.  They know that they are paying below market.  They've likely been shopping for a new place in anticipation of the potential new ownership and have seen what they would have to pay if they moved.  Waiting to raise the rent will create a grudge.

Good luck.

Thanks for the advice! We are not going to be doing any improvements. I love the "update" idea!

In addition to the above comment, also send the tenants an "introductory letter" which outlines when rent is due & late, how it is to be paid & late fees, a contact number for maintenance request.

Congrats!  I love purchasing already rented properties!

I write a letter to them, introduce myself and my policies- when rent is due, how to pay, who to contact with issues.  In my case, there were 4-8 months left on the 12 months leases when we purchased so I increased rent for the next lease if needed, I only had two tenants stay on (college town).  I would offer an incentive for signing a longer term lease- $50 less a month than your new month to month price maybe.

At closing, make sure they transfer the security deposit and prorated rent for whatever was collected that month.

Kelly

I probably wouldn't lock them into a year lease until you get a feel for the type of renters they are.  Did you get any info from the previous owner in regards to their payment history?  Do you have their leases and security deposit info?

The month-to-month lease gives you flexibility.  They might prefer a month to month because of the flexibility it gives them.

Want to raise the rent?  If they are on a month-to-month lease just give them lets say a 60 days notice that their rent will be raised.  At least if you give them 60 days they can be able to find another place if need be.

As others have said, it can be done professionally.

We start with a letter of introduction and let the tenants know we will not be raising the rents at this time. This puts them at ease and helps us establish a positive relationship. Tenants are then more likely to open up, cooperate and share important things, like the property history and what they need to be comfortable in the home. 

We introduce them to our management style and rental agreement. We establish new tenant files, but keep the old records too (if given to us by the previous owners) especially the original move-in checklists. We only do MTM, as leases tend to lock the landlord in more than the tenant.... we like the flexibility MTM gives us.  Also, we can rent up easily at anytime of the year, so we don't need to time our turnovers to the seasons. 

We do a new property condition report and note any deficiencies in the unit. Then we ask the tenants if everything is working okay and to tell us of anything that needs maintenance or repair. We immediately address deferred maintenance and damages. 

After we have spruced up the place to our standards, then we consider whether we need to raise the rent. We purposely keeps rents a bit below the going rate for our area. This gets us a bigger prospective tenant pool and encourages longer tenancies. When we do a rent raise it is generally timed to coincide with some type of upgrade we have done. For us, the best month to raise rent is May, but we have raised rents at other times of the year as well. We will also raise the rent if the tenant starts breaking rules. That encourages them to get back in line or ship out, and provides us with some compensation for the extra trouble.

How do you all handle getting background information on them...like credit scores and income verifications (for example)?

I use all of the strategies that Marcia listed. The introduction letter I use introduces them to my management style (i will also do this via phone) and asks them to verify there are no safety hazards on the property. When my repair guys go the fix the deferred maintenance I have them do a walk through inspection with pictures just as if the tenants just moved in. In most cases that I buy from landlords they do not have any documentation except for the lease.

Originally posted by @Michael Attaway :

How do you all handle getting background information on them...like credit scores and income verifications (for example)?

If the tenant is already in place and is paying rent/utilities on time, we're good to go. No need to spend the extra time and money to check credit and income.  I would however want to check legal history in case they have done something really bad that could indicate more risk. Also, make sure the security deposit is sufficient.

I like @Chad Hoverdale's suggestion of using the application form to do a "resident update". Just running through my tenant screening questions works for us. You will know soon enough if the tenant will work out or not. 

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