Hey guys, I'm in the process of purchasing a fully leased quadraplex. My question is although I know I have to honor the existing leases, do I need to write new leases with the same terms instructing tenants of the change in ownership and the new payment process? The previous landlord actually has her bank account listed in the existing leases as the payment method. I appreciate any insight.
You do not need to write up a new lease. I would just provide a welcome letter with your information and how you would like payment.
@Anthony Interesting thought. A little concerned about the enforceability of it. Ie tenant doesn't pay rent, but says they put it in the account in the lease.
@Philip Mullinax You could try to get them to sign an addendum with your payment details, but they are not required to sign it or a new lease. Their current lease is a valid contract until it's termination date. If you can show that you are not receiving rent you shouldn't have any problems evicting if necessary.
@Philip Mullinax It is extremely common for leases to have language of how the tenant needs to pay the landlord. It is also common practice to send an Addendum or a Welcome letter when the new owner buys the property as @Anthony Hurlburt mentioned. You're not changing the lease terms, simply where payments need to be made.
We've had situations where tenants have setup auto-pay with their previous landlords and rent was sent to them and not us. Everyone works together to get over these little speed bumps and it really isn't much of an issue. Because of this I tend to expect things to have the potential to be a little wonky on the first rental collection date (especially when you start dealing with lots of units). I've also found that it also is a great indicator of whom your challenging tenants will be if things don't go exactly to plan. They tend to self identify quickly.
@Anthony Hurlburt and @Neal Collins this is definitely a new experience for me. I appreciate the insight as to the Welcome Letter and Addendum. I have a good template from one of @Brandon Turner 's books. I already got good use out of the Estoppel Agreements. It is funny what you are saying about the first rent collection being wonky. I have a pretty good idea of which tenant may be my trouble one. Do you guys have any recommendations on rent collection sites?
My most common rent collection is just a direct ACH transfer to my account from the tenant. I also have one tenant who uses Venmo to pay and that works great as well.
Probably best to knock on doors and introduce yourself (or your property manager) and provide a welcome letter. The goal should be to make sure everyone knows where to pay rent and who to contact for maintenance. This is also a great opportunity to try to set all tenants up on electronic rent payments, it will make life much easier.
As for rent collection sites, it really depends on the size and scope of your operation. I have heard of Chase Quickpay and Paypal being used with good effect for a couple of units. If you have a larger portfolio your property management software will probably have a way to take electronic payments (most likely by setting up a separate merchant agreement). Alternatively you can reach out to your bank and see their options on accepting ACH payments to your account. I would try to avoid credit cards as fees are obnoxious (~3%) and stick to ACH payments if possible.
@Philip Mullinax Check out Cozy.co for rental payments.
@Anthony Hurlburt @Jeremy S. @Neal Collins Thanks guys for the suggestions. I currently have three single families that I have had set up on PayPal since the beginning. I like the idea of ACH payments, but not sure about giving a tenant my account number. I haven't heard of Venmo or Cozy before, but looking at both sites I think I like Cozy the best for its comprehensiveness. Its seems like its 'Property Management Light' which is probably what I need. A little more concerned with how I set up the new tenants as I didn't get to screen them so not sure what I am dealing with. I will definitely be putting together welcome packets to cover the basics. Judging from the Estopels it doesn't seem like the previous owner was very involved. I.e. differed maintenance, not having copies of the current contracts, etc...
It would be a good thing to present tenants with a new lease that has the same terms of the current lease with you listed as owner / manager.. It couldn't hurt to have that in place as soon as you can. Schedule inspection of units first week of ownership, present them with a new lease updated lease and get a updated contact sheet for them filled out, phone, email, license of cars.. Inform them of emergency maintenance number and during inspection make list of things needed for service.
Method of payment should not be left for last minute,, I'd set someone to either pick up the current upcoming rent for the first month until you get time to set up another way to figure it out.. The more face time you have with tenants the first week / month of ownership will enforce the fact you are a involved new owner and they will appreciate the attention.
Train them from the beginning and you'll have less headaches.
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