I am looking at a 2 family property that has a lot of potential in a good area. Both units are rented and need some work. Both tenants are on a month to month agreement with the current owner. If I buy this property and there is no lease how easy/difficult would it be to either drastically change rent or evict? The rents are way under market value and tenants have been there for 14 yrs and 3 yrs.
both tenants are on a legally binding month to month lease, which transfers to you upon taking over the property (this lease can be oral or written). as long as you are not in a rent control areas, and pending local restrictions, you can typically change any lease terms including rent with 30 days notice (or one full rental period). this means if you want to raise rent for January 1, you must give notice by November 30th.
My suggestion is to get a professionally written month to month lease, at slightly higher rent than current rent and ask tenants to sign it when you take possession. That gives you more control, since you will have an airtight lease. Then, learn all your landlord tenant regulations so you can operate it as a business. Once you know how to run your business, raise rents to market and accept the fact that they may leave.
Also, consider asking for property to be delivered vacant. This avoids a nasty eviction, and affords you the opportunity to upgrade the units to command more rent.
The units do not demand market value in their current condition but once renovated they can go for almost double. If I give them the 30 days notice and they do not sign the lease or agree to the rent increase then that would be ideal. The place is sold as is and they will not sell it vacant.