New Property - Inherited Tenants Questions

[Brandon V.]

Hi All,

I just got an accepted offer on a four family building!  The good news is its all rented out.  The bad news of course is seeing some of the leases.  

On one of the leases it states that the Term is for 12 months beginning May 1st 2011 and ending April 30, 2012 with "Automatic Renewal" written on the side as well as other landlord or Tenant obligations saying Automatically renewable.  Does this mean that I would need to honor an automatic annual renewal for May 1st, 2017-April 30th, 2018 or could this be considered a month to month renewal.  The reason I ask is rents are $665 where I believe market to be closer to $725-750 or should I just be thankful that I have a long term tenant.  

Additionally there is another tenant who is month to month who pays a rental price of 630-30 for maintenance.  This tenant also is the only one without a security deposit.  This unit could be rented for $700-725.

Thanks!

Brandon

[Thomas S.]

Unless a new term lease is signed each year your tenant is on M2M. You can do as you please.

Why would you be thankful for having a long term tenant. All tenants that pay market rent on time are of the same value. The length of time a tenant has lived in the unit in the past is irrelevant. Do not hesitate to go for a better tenant.

Start fresh by jacking there rents to market, those that want to leave give them a grace period long enough for you to find new tenants and move forward. On the other hand you could raise there rents one at a time to do renovation work before finding new tenants. That will make the vacancies more manageable.

You obviously bought it for under market due to the low rents so you want to move quickly to benefit from the higher rents. Inherited tenants are generally not desirable so you would be farther ahead to find your own good tenants that are willing from the start to pay market.

It's always better to clean house and start fresh with a new business.