My name is Nichola and me and my husband are closing on our first 4-Plex in Michigan today that currently has 3 tenants that we are inheriting and we will be moving into the open unit later this month.
All the tenants are currently on month to month leases and the rent is below fair market and the screening process they went through is very shady and 2 out of 3 tenants do not pay on time. I want to send a notice introducing us as the new owners and giving them notice that in order to renew their lease they first must consent to a criminal, credit, and eviction screening under our new minimum qualifications/new lease terms for all persons over the age of 18 that live in the home and also inform them that rent will be increasing November giving them the chance to stay if they want and meet our rental qualifications or decide if it's best for them to move.
I want to know does this seem reasonable and if there are some things I should consider before moving forward with this plan?
Thank you for your time.
I think it sounds great and congratulations on the new purchase. Smart way to start off your real estate investing
Hi @Nichola Dotson ,
You should always screen tenants through your normal screening process, regardless of whether they are inherited or not. If they have good standing with the previous owner, you can use your best judgement on whether to let them stay.
Purchasing properties with inherited tenants requires careful handling. You should have already spoken to all three to see how they feel about all of this. Are they happy there? Do they want to move? Are they angry the place is being sold? It's possible that if do this AFTER closing, you end up with a few evictions on your hands, which will destroy a good deal.
My suggestion is to learn how the tenants feel before closing. You need to be prepared for all scenarios: let them stay, allow them to leave after a month, give them cash for keys, or evict them. From my experience, inherited tenants rarely go quietly if you tell them to leave. Again, this is a delicate situation and requires careful handling. Best of luck!
@Matt Souza I have gotten the chance to speak with the tenants and they are not happy with the current owner and property management because their issues to them have been ignored and the two who were saying they were ready to leave are the ones that pay late but all three are violating the terms of their current lease and since my family will be moving into one of the unit apartment with our children it isn't imperative to us that we know who isn't really living amongst us. I want them to leave but I want to do it like they are actually making the decision to leave which I wasn't thinking that telling them they will need to qualify and giving them a head start up that the rent will be increasingly by November to give them adequate time to find other living arrangements if they can't handle the increase or the new qualification and lease requirements.
Yes give them a heads up but not before you close. Set the criteria and give them that prior to asking them to complete the screening so they know what is being set.
I'd wave the screening fee. if they meet everything except income criteria,, then ask for additional security deposit.. paid over 30 to 60 days..
Can you afford 3 vacant units.. and turn costs,.. and loss of rent for 60 to 90 days.. This might be something you could implement in spring when rentals are easier to fill and your settled.
You could do a rent increase within a decent percentage..between now and then..
Download your State landlord tenant laws so you are prepared.
Thank you @Deanna McCormick I am going to go ahead and waive the application fee I don't want to do anything too drastic but I want to screen them and adjust the lease and rent rate and give them the option to renew or not once I make them aware of the expected changes and timeframes. I could afford all the bills if I did have total vacancy because me and my husband are both still employed full time but I don't want that to have to. Thank you for your input very helpful for me.