I’m purchasing a new property and the tenant as been there since 2010 and I’m sure hasn’t had an increase. He’s currently paying $300 and the property next door in same condition is currently for rent for $550. What would be a reasonable increase without running a good tenant away?
First thing to do is figure out if there's a lease in place. If there is, you have to honor the existing rent amount until the lease is up. If there's no lease and the tenant is month to month, I'd raise the rent to market rate.
To determine what the market rent is, I'd sample more than one property though. Here's a guide to help you figure out what the market rent is: The Ultimate Guide to Fair Market Rents.
I'd start by having a conversation with the tenant. Open and honest communication is best. The tenant is no doubt aware that they are paying under market prices and that the place will be sold. They probably have some fear as to their fate. So put them at ease.
As soon as you acquire the property arrange to meet the tenants at their place. Introduce yourself and your management style. Let them look at your rental agreement with the monetary amounts blank. Then let them know you would like them to stay, and to transition over to your rental agreement as soon as possible, but a rent adjustment needs to be made. Ask them what they think would be fair rent and then ask them how much they can afford to pay. They will no doubt throw out a number above what they are currently paying, but still below market. Pause, and then let them know you will need to think about it. Then come back with a counter offer the next day.
Everything is negotiable. See if you can get to a point that is a win-win. No one likes to be cornered. Treat them with respect and you are likely to get respect in return. If you win them over, they are likely to pay more to stay, not only so they won't have to move, but also because they may see you as a great landlord. Ask them if there is anything in the apartment/house that needs attention and tend to deferred maintenance right away. Tenants are more likely to feel good about staying if they know the landlord will keep the place well maintained, is approachable and is fair and kind. Good luck!
Awesome answer Marcia..treat people like people and good things will come in return.
Treat your investment like a business and profits will follow. You are a landlord/investor not a social worker.
A good tenant is one that pays market rent. Good tenants are a dime a dozen. Their is no reason to justify supplementing any tenants rent.
Tell your tenant rent is rising to $550 in 60 days (assuming you are in a legal position to do so). If he stays good if not you have more than enough time to find a real "good" tenant.
Anyone have a place they use to get blank rental agreements?
Yes, treat your investments like a business and profits will come but there’s no reason to create unnecessary tension to a loyal tenant.
Suurrree...go in there with an iron fist to a viable,reliable tenant and treat them like a product or a piece of property ...I’m sure they’ll be ecstatic to work with you in the future and will treat your property with respect 🙄.
Find the middle ground...take no bull**** but also treat your tenants how you’d want to be treated. Blows my mind that some people forget one of the first things they learned in life.
I will write him a letter indicating you want to raise the rent. Showing his the asking price and ask him politely if something less will work for him?
If the market rent is 550 and he’s paying 300 then hopefully you can find something simple such as the Zillow rentdometer(proof for the average citizen)that shows comps going somewhere between $400 and $700. That way you won’t be on the low end or the high end. He feels like he’s getting a good deal and you’re getting the rent you wanted all along. Win-win.
@Duane Hundley you should consult an attorney local to your area. Every state has its own landlord tenant laws that you need to follow. A generic lease is just not good business, for your own protection.
"Suurrree...go in there with an iron fist to a viable"
Regrettably the previous owner has created the problem for the tenant and the tenant as a result has had a relatively free ride for 7 years. The ride is over, nothing iron fisted about informing him that he must now pay a fair market rent for the roof over his head. Why investors feel they must make business decisions based on emotions boggles the mind. The fact that the previous owner was a poor business operator is now the responsibility of the new owner to resolve.
Leave your personal feeling at home where they belong. Absolutely nothing wrong with charging market rent on your investment. It's a business not a charity. No reason for any investor to feel guilty for wanting to operate the most successful business possible.
As always it’s hard to judge someone’s intention over the internet and how they’re using their words. I wasn’t in disagreement with raising the rent to market value. I get it’s a business and we’re here to make money. It sounded as if you were giving advice to him that says “ I’m raising the rent..if you don’t like them get your s*** and get out”.
I was saying that approach probably isn’t a good one to lead off with(common sense). Would it come down to that if he doesn’t agree on the rent increase? Sure it would but I wouldn’t talk this way with the tenant right off the bat.
Per lease agreement is when you can send proper notice of increase,
If the lease is several months out, I would inform the tenant that the increase is coming so he is well prepared. Otherwise I'd raise the rent to match the rate the apartment with the current condition of the interior will support..
I only do month to month leases so keep him on month to month so if he chooses to leave you can start fresh.
You don't owe him any explanation of why rent is increasing, nor does he why other owner kept it so low..
If you choose to non-renew him, give proper notice and maybe an extra month. per lease term agreement.
Get your own lease inforce as soon as possible.
“ I’m raising the rent..if you don’t like them get your s*** and get out”.
It is irrelevant how you present this to a tenant. In the end the message is exactly the same from a tenants perspective. This is the reality that a business landlord accepts.
Originally posted by @Duane Hundley :
Anyone have a place they use to get blank rental agreements?
Good morning Duane,
I retrieve my rental agreements from Rocket Lawyer. They have a trial offer that you may use and download their templates free of charge in the first 7 days. Otherwise, Google will be your best friend. This was one of the results that I found when I googled searched rental agreements. http://www.yummydocs.com/file/simple-rental-agreem...
Let me know if that works out for you.
Good morning Duane,
Is there a current lease in place? If so, unfortunately you'll have to abide by the tenant's current lease until it expires, unless you were to make a deal with the current owners prior to closing on the house.
I think the best bet would be to speak with the tenant directly. Set up an informal introductory meeting and let them get to know you. If there is currently a lease in place, go over the details of the current rental agreement. Go over both yours and their expectations with negotiation but be open and honest with the them as far as your expectation of change.
With that being said, I think that if these are good tenants that you should express empathy but be honest about the rental increase. Letting them know what you think a fair rental amount would be and asking for feedback will probably give them more ease than coming in and increasing their rent full force.
Tenants will always have fear when the property they live in (and have lived in for long periods of time) is purchased and managed under new ownership. So coming in with that knowledge and addressing that issue first will likely soften the blow and create an understanding between yourself and your new tenants.
I hope that helps!
7 year old tenant? Yikes, might have to check with their parents!