A few months ago I bought a duplex. I fixed up and am now living in one side, while the other side is rented by a couple who has rented their for 17 years. Their rent has gone up marginally over the 17 years from $610 to $700 per month. Based off of comps, I should be getting $900/month. Their lease expires at the end of November. The fact that their lease ends right before winter in Ohio is not ideal as not many will be looking for a place.
I have narrowed my options down to a few.
1) I could not renew their lease and fix up their side (which would take 2 months to renovate) then try to get it rented in February. Remodeled it should be able to rent for $1,000/month.
2) I could offer them to renew their lease upping it from $700/month to $800 or $850 to get it closer to market value. Which would be a shock to them but necessary if they are staying.
3) Since winter is not an ideal time that renters are looking in Ohio, I could renew them on a month to month at their current monthly rate or new increased rate and give them an ultimatum to sign a year long lease in March or move. That way I could get them on a year lease or get them out and fix it up by Summer when more renters will be looking for a place.
They are good tenants who keep to themselves and pay on time however it is obvious that they do not pay market rent and their side needs remodeled in order for me to get maximum value and make the numbers work. I have the cash to fix up their side, however the odd timing of their lease is putting a wrench in things.
Thanks for your suggestions.
I'd give them 60 day notice of rent increase to 875.00 and do month to month terms so that they can look for somewhere else and you can give them 30 day notice next spring that you aren't renewing..
Either way they realize something will change.. you'll have to figure out how much work you want to do while it's occupied and people are always looking for housing,, winter isn't the best but you can plan ahead if you know what's up.
Also depends on your renovation cost. I have found very properties that can be renovated for less than 10k if hey have been in there 17 years. 2 months of rent plus 10k renovation (at a minimum). That takes 3 years to get your money back if you have zero turnover with the next tenant. You might be better off leaving them there below market and just raise it $50 per year. Most landlords would love a tenant staying that long. Turnover kills your ROI!