Cleveland, OH · Member since 2016 · 3 posts · 0 votes
Hello! I am in the process of buying a triplex that is 100% occupied. None of the tenants had to put down a deposit or sign a lease (one tenant has been there 25+ years.) Thanks to this site I found that we need the tenants to sign an Estoppel agreement, but I'm afraid I may be missing something else. I was also wondering if I am allowed to raise their rent and require a deposit since there are no current leases on file? They are all paying well below market value for the rental units.
The estoppel agreement is correct, If there are no current leases I would think you can create a new lease where you can raise the rents to a fair market price. It looks like you are inheriting a property with a bad owner if they had the tenants with no lease....
Yes, the owner did not do anything by the book. He was elderly and passed away last year so his wife is selling it now. He owned the property since 1965 (which is maybe why he never had leases??) Who knows! His son is also a real estate attorney, which surprised me!
This can be the worst and the best situation for a investor. Assuming you are only paying based on the current rents you stand to make good money in the deal. Remember it is only worth a cap based on present rents. There is no other value to the property.
Draw up a new lease and have them sign, raise the rents straight to market. Some may leave but this is your opportunity to do some cosmetic upgrades and get higher rents and better tenants. The existing tenants will probably not be happy with you as their landlord as they have been hand fed and had their rents suplimented for far too long. Cleaning house may be the best end result.
Cleveland, OH · Member since 2016 · 3 posts · 0 votes
10y
Thank you for the advice, Greg. I was struggling on when/how to raise their rent, so I think right off the bat would be a good way. Let's just hope they aren't unhappy enough to trash the place if they leave!
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
10y
When we've inherited tenants who are paying below market rent, we stair step the rent up over several months to give them time to adjust or leave. I can't imagine how you can collect deposit at this point, We have one inherited tenant who has no deposit, we just hope for the best. Since you do not have move in condition reports, you may want to create a current condition report with them to protect yourself form further future damage. Or just get in compliance as you get new tenants, since you can't likely collect damages anyhow.