My husband and I are closing on our first rental property this afternoon. We are inheriting a tenant, who is a clean freak, pays on time, wants to stay, and has zero maintenance requests. We did the walk-through yesterday and everything looked good. His year lease expires 11/30/17.
I am trying to make sure I have covered all of the bases for inheriting a tenant/having a new tenant in Florida.
I am sending a welcome letter today detailing that we are the new landlords, we will honor and follow the previous lease, we have been given the security deposit, etc. This letter will also give instructions to the tenant on how to set up a Cozy.co account to pay rent.
Beyond that, I know I need to put his security deposit in a separate non-interest bearing bank account (will be done by this weekend), and notify the tenant within 30 days of the location, account number, etc.
I would imagine I should contact the utility companies to let them know ownership has changed. Am I missing anything else?
Do I need to have a new lease drafted up, or a lease addendum stating we are new landlords, or can I piggy-back off of the previous lease for the duration of his tenancy? I don't want to sign another yearly lease, I'd rather let it go month-to-month, which is already written in the previous lease.
Thank you for your help!
Sounds like you're on the right track! Congratulations on your new property! Yes, just get a copy of the lease from the owner at closing and be sure the security deposit is also provided to you at closing from the owner.
You did everything right it sounds like, but I would highly recommend Googling your county and state rental laws. I'm betting you can find them online and read them to be familiar with them.
Do you intend to raise the rent upon their lease expiring? Do the tenants want to stay? Unless the place is extremely under market, I would start this year off by not raising the rent. Try to keep the good tenant and get a feel over the next year for the property and landlording. After that, consider if a rent increase is in order.
Since November 30 2017 isn't really far away, you should come up with this decision rather quickly. I dunno if you need 30 or 60 days notice of renewing a lease/vacating/etc.
Assuming the lease reflects accurate laws and that you also like the wording, I would say to definitely use it to start off your own lease template!
Oh, and get the new lease signed no later than 30 November 2017! You can always sign it before that date, but have the lease state that it takes effect on 01 Dec 2017 and ends on whatever date. If you do a year, that'd be 31 December 2018....which puts you in the middle of winter.
If the tenant seems interested in staying, I'd recommend that you have the lease end in the Spring, so that if they decide to vacate, you'll likely have an easier time filling it since many people prefer to move during nicer weather.
@Nicole W. Thank you so much for your reply!
The tenant wants to stay very badly. The rent is quite below market, currently it's $795, market rent was appraised at $975. However, the unit would require a good amount of cap-ex before we could ask for market rent. It's very outdated in style as well as mechanics. The appliances and even the air handler are original, from 1984!
Our cash flow is good, even with the below market rent. We are keen to keep this tenant as long as possible. He's a clean freak with no complaints about the unit, so your suggestion of keeping the good tenant in order to get the feel for landlording is right on point.
I do want to raise the rent a nominal amount at lease end($20-$25), just to secure a bit more cash flow.
Thanks again for your help!
the tenants current lease will transfer to you upon purchase. you do not have to have him sign a new lease when current one expires, the month to month wording keeps it active as a month to month lease, however, you should look it over carefully. if it does not provide enough protection, you may want to ask him to sing a new month to month lease. you do no know how carefully the old owner was when making that lease. he may have had a local lawyer make it, which is good, or he may have found one online, which may not properly protect you.
@Sara K. I think you're on the right track but just think through raising the rent $20 per month. You run the risk of spooking the tenant and having them leave. If rent is $800 per month and you end up with just 2 weeks vacancy that's $400 in lost income. That will take you 20 months to recoup with your $20/month rent raise. If you want to get the tenant out to rehab, then raise the rents. If you have a good tenant and it's not going to kill you to wait a year or two to do a major rehab (and then raise the rent to $975) I'd leave well enough alone. Half of the time tenants get spooked with new owners and make plans to exit anyway. So it's anyone's guess what will happen. My only real message is to think about payback periods when you're doing tiny rent increases.
With your tenant $ 200 below market you should be able to push the rent more than $20. Having a tenant that has indicated they want to stay they have sent you a message that they know they are below market and will expect a rent increase. As for your market rent that is based on comparable units to yours not a fully updated one in your area. If yours is out dated market will not be $975.
My guess is that you will be able to push the rent $100 and he will gladly stay.
If they do not stay a quick update, bringing it to market, with a months lost rent will more than be worth the cost of a tenant change over.
Don't forget when you do a update you collect the higher rent for as long as you hold the property. A $5000 investment with a $2400 return annually can't be scoffed at.