Removing good tenants

7 Replies

I have been caught in a dilemma for months now. I have a 3 unit property. There is a 3BR SFH and a duplex with two 1BR apartments. I have been living in the 3BR since purchasing the house two years ago, slowly fixing it up. The time has come where I have completed what needed fixing. My plan is to move into one of the 1BRs when they become vacant, but neither plan on moving anytime soon. Both units have good tenants who I have had almost no problems with, but by moving into the 1BR, I can rent the 3BR out and would completely cover the mortgage, giving me more to save toward another property. (Not to mention I love that apartment and prefer it over the 3BR)

Would it be wise to remove a good tenant just to make more rental income? 

3BR Rent in my town averages $1400. 1BR Rent average is $800. They are paying $750 for a higher end apartment for the area.

Any input is greatly appreciated.

That is a tough position to be in.  You hate to lose a good tenant,  but having an extra $600-700 a month is hard to pass up.   This is a business,  and if you want to grow it, you need to do what is best for the business.  

If you decide to move into one of the 1 bed units,  I'd give the current tenant plenty of notice. Getting kicked out of a rental is pretty tough, especially if you didn't do anything wrong.  I assume they are on a month to month lease?  

@Tim Lindstrom  They are on a month to month. I've even thought about giving them 3months and a cash incentive if they are able to leave earlier. Or even offer the 3BR to them, at a slightly discounted price. It doesn't help that I am a total sap and hate these situations!

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I feel your pain.  I hate breaking bad news to people.  I don't know if you have talked to either tenant yet,  but maybe they are already thinking about moving,  and just haven't approached you yet.  That would be a great "out" for you.  I think offering them the 3 bedroom is a nice touch,  but don't discount it too much, or you are giving money away.

Good luck with your decision.  This is one of those times you have to decide if you want to be a nice guy, or a business man.  Unfortunately they aren't always compatible

I think you need to keep your plan in mind, and that involves having to terminate the agreement on the 1 bedroom.

I would not give them 3 months plus cash.  It seems like in these situations, the tenants are still there to the last minute.  If you were willing to give them, say, $3,000 (you decide, I'm just pulling a figure out of my hat) max, then I'd offer them $3,000 if they can move in 30 days, $2,000 if they can move in 60.  That you'll give them a total of 90 days, but they will get no incentive money if they haven't moved within 60.  Something like that.  And that you will also hand them their full deposit on move-out day, as long as they leave the place clean.

Then, they may be quite happy to move quickly.

@Sean Connolly

I advise highly against offering them any money at all.   The best solution is to go to your good tenant, and tell them you need one of the one bedroom units.  You then offer them first the opportunity to rent the 3 bedroom apartment.   Tell them you've renovated it, and don't need the space.  I have found tenants are actually pretty reasonable if you just build rapport with them.    One of them might have a good friend who will want the place with them, or they may have been making due.  Regardless, you've found a nice way to say you need one of the units.  

Another avenue of this is to ease the burden on the tenant, and suggest several great one bedroom apartments in the area.   

But keep your money.  And learn to talk to tenants.

You have chosen the wrong business path if your are unable to make decisions without emotional conflicts. Put on your landlord/investor pants and get it done. If the shoe were on the other foot and they were making the decision to terminate their lease they would not give you a second thought. They owe you nothing, you owe them nothing.  

Give them proper notice and don't give it a second thought.

 

My advice is give them 60 days notice. That is plenty of time to find another place to live. End of story!