not renewing long term tenant lease

4 Replies

Looking for a bit of advice on how to handle this situation.  I just bought a duplex a 6 months ago and inherited the upstairs tenant.  Downstairs was vacant, I cleaned up the apartment, screened and screened and got a great tenant. 

The tenant I inherited has been living in this apartment for 8 years now.  He pays his rent on time every month, which is almost 200$ below market.  I have 2 months security ($1800) for them.  He is on a 1 year lease and lives there with his illegal wife (she is from Honduras) and daughter.  She does house cleaning jobs here and there and the husband works as a chef at Red Lobster.  They make very little money.  The husband also collects disability for whatever reason but can still work.  I got this house for a great price but the apartment they live in needs a lot of work.  New kitchen, floors and some updates in the bath as well.  I'm thinking $5000ish because I'm able to do some of the work. 

The PROBLEM.  They make so little money that if anything ever happened, I doubt they would be able to pay rent.  If I raise rent in June when his lease expires, I doubt they would be able to afford it.  They have run out of oil 3 times this winter so far and it's only January.  The rent they are paying is ok based on the current condition of the apartment but I need to renovate that apartment so my appraisal next year comes in at the right number so I can pull my cash out.   If I renovate the apartment now, which I want to, then I'll have to raise rent which I know they cannot afford.  I know that if I kick them out of my apartment, they are going to have a very hard time finding a new apartment with there income as well as the fact that his wife is not a citizen of US.  

Just curious how you would handle this?  I'm pretty sure I just need to not renew the lease but it's hard to kick a family out onto the street that has been living in this house for the past 8 years.  They are really nice people and rent is definitely their priority.  The previous owner said they never missed a month in 8 years.....

You need to wait till there lease expires and goes month to month.   Then let them know you are not renewing any lease with them and you are taking back your property to renovate. 

From someone who tolerated inherited tenants for more than a year, I wish I could go back and would have given notice immediately.  The repairs that the units needed nickled and dimed me far longer than I should have allowed.  By the time I penalized myself with a few costly temporary fixes, I quickly got over feeling sorry for their situation.  The red flags coudn't be ignored.

Have empathy.  Be kind.  Give them two months notice that you won't be renewing, say you'll provide a great reference and give them their deposit in cash on move out day (if all is clean and good).  But, be firm in your resolve that this is first and foremost a business.  You can't do the updates while they are there.  They will land somewhere else that better suits their finances.

The updates allowed me to double the rent.  Wish I had done them earlier.

This is one of the tough parts of being a landlord an investor. If your just looking at the bottom line then you get the place back renovate and get top dollar for rent.

If you prefer to try and help people then you might keep them for now save money on having to renovate and do a small rent increase.

Something I recently did in a similar situation was raise rent just a little get tenant to apply for Section 8 and get on 2 year waiting list. Once they get there voucher I will get the property approved for Section 8 and then I can get market rent and the tenant who is on disability will pay less than they are paying now and government will pay the difference.

I'll loose some money while I wait but this way I help someone out.

For only a $200 rent increase I am not sure it is worth it to spend 5,000 on a renovation plus the lost rent while it is being renovated and until you rent it again. These tenants also have a proven track record of paying rent on time which is very valuable. You also had not mentioned that these tenants are requesting repairs so I am assuming that they are not asking you to spend any money on the property which is another plus. I would only want to replace a valuable tenant if I would have a greater financial benefit than what you are projecting.

But if you truly feel you have to do this the best you can do is just to be kind to them and give them as much notice as possible so that they can figure out other accommodations for themselves.

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