Just closed on my first two-family! What now?

Question

So, we finally closed on our first two-family home yesterday afternoon. I gave myself sometime to let it sink in and enjoy the fact that it was finally over, we got a house we liked, after a 15-month search. The seller will be living in the owner's unit through to the end of October and we have the agreement on paper (forgot the name of the document we signed). The second floor tenant is currently month to month, and I'm not sure how to initiate collecting rent, setting up a new lease, charging security deposit (made the mistake of not asking the seller to collect one prior to the sale), etc. Now, she's currently paying below market rent, I am looking to increase it. I'm considering all the possible scenarios. If ultimately she chooses not to agree to my terms and not sign a lease, how much time do I have to give her to move out (NJ)? I don't want to put myself in a situation where I ask to increase her rent, she gets angry/upset, and decides she wants to move out and doesn't pay the next few months of rent.

Also, utility bills (water, sewage, gas which will be paid wholly by me), are these all automatically transferred to my name or is there a process I have to go through for that?

My attorney mentioned registering myself as a landlord. Is that at the township, county, or state level?

Also, utility bills (water, sewage, gas which will be paid wholly by me), are these all automatically transferred to my name or is there a process I have to go through for that?

My attorney mentioned registering myself as a landlord. Is that at the township, county, or state level?

EDWARD M. · Answer

@Dorothy Butala Thanks for the advice, Dorothy! I looked through your bio briefly, very impressive. I'm hoping to make similar strides in the near future. Good luck with everything.

@Johann Jells Thank you, Johann. I worked on everything and it's already being taken care of. You were right about closing lawyers, unfortunately.

Johann Jells · Answer

@EDWARD MAURICIO Are you aware the unit is rent controlled? All rental in NB are.  http://www.northbergen.org/Departments/rent-control  Fortunately the NJ anti eviction statute does not apply as the previous owner occupied also. You are in a minefield IMO, even trying to collect security from an existing MtM.  I'd find a landlord tenant lawyer. They tend to be more of the bottom feeding type, but a closing lawyer knows nothing of this stuff, as you've just discovered.

Dorothy Butala · Answer

Congrats on your first investment property!

Since the second floor tenant is on a MTM lease, you can implement a new lease with them starting at the next rent payment cycle (to include increasing the rent), but I would give them the lease to review and agree to at least 30 days in advance of the lease taking effect (but if you give it in the next couple days you should be able to get the new lease started in November should she want to stay). If she decides to move, you need to read the lease to see what the terms are for terminating her lease (I am assuming 30 days, which is why I give tenants at more than 30 days to review their new leases, because I want to know 30 days in advance if they are leaving). If she gives you a 30 day notice, and does so in the middle of the month, have the lease end at the end of the month, not on the 30th day of the notice, then you won't have to worry about pro-rating rent back to her). If for some reason she gives notice she is leaving, but stays after the 30 days, you may need to start the eviction process (again refer to the terms of the current lease).

My tenants take rent directly to my bank by either ACH/direct deposit, mail it to the bank, or go to the bank in person. It stops you from having to knock on doors, and establishes that you will not be a hobby landlord. Your time is way more valuable than going door to door for rent. The nice thing about the depositing directly into the bank is you can see exactly when the money was deposited because most banks post it the day it was received, so there will never be a question of whether it was late or not. Regarding the security deposit, if the seller collected a security deposit from the tenant when they moved in, it should have been transferred to you at closing. Security deposits are not payments, therefore transfer to the new owner because the money "stays with" the tenant not the owner on record. Did your attorney not transfer the security deposit to you at closing?

Depending on the type of utility some will need to be in your name and others can be in the tenants name.  Municipal utilities like water are in the landlords name where I live, so those are changed over by the attorney at closing, other ones like electric, you would need to call to change the name.  Can I ask why the tenant's are not paying for their own electric and gas?  Did your attorney not inform you that they would do these changes (assuming that is the standard practice where you are located)?

I don't know the rules and regulations of where you are located, so you will have to talk to other investors in your area, and give your local REIA a call and see what they say.  Hope this helps!