I have a dilemma and need to have some professional advice here. We are buying a duplex. There are already tenants in place however the lower apartment will be vacant when we buy it because were househacking. The upper apartment tenant pays 275 a month for a huge 1 bedroom because he was friends with the owner. The market rent for an appt like this in the area is 500$. We would be willing to keep him if he would pay 480-hes a long term tenant and pays on time etc according to seller anyway. However, we cant ask him or give him notice of increase in rent until we OWN the house AFTER closing. So my dilemma is...if he stays we would be okay with him paying 275 for the time between giving notice and it taking effect however he could also decide to not want the rent increase and decide to not pay the last months rent and even make us take him to court for eviction which could cost us up to 750$. A pro of keeping with him is someone is paying although i think we could definitely rent it out easily for 500$ a month. However, I just dont trust people all that much with what i've already been through. Any advice?
I would strongly advise getting rid of the tenant. Friends of the owner almost always turnout to be horrendously bad tenants. Have the seller get rid of him or have them raise his rent to $500. If he is on a term lease, which is highly unlikely, you will need to give notice as soon after taking ownership as possible.
Make sure you get esstopal letters in this situation.
Cleaning house is always better in the long hall when facing inherited tenants.
@Thomas S. gives good advice. However, it's not likely the seller would be willing to get rid of him prior to closing. After all, if you didn't close he'd have lost his tenant. I would, however, insist on a signed estoppel certificate from this tenant prior to closing.
After closing, I would give him proper notice of termination (based on his lease), and then present him with a new lease for the market rent amount (or a little less). We can all hold out hope for him accepting it, but all my money says he leaves, either willingly or via eviction, just as you've drawn up in your playbook.
Be prepared for the expense of an eviction, and proceed with it as necessary ASAP. Do not delay or buy any BS he tries to feed you as a new landlord, or you'll be without rent for more time than necessary. (3-day notice to pay or quit as per lease or NYS law, whichever is more generous)
You'd like to get him out during the spring so you can turn the unit over and rent it out before the fall, when it will be more difficult to find a good tenant as most people move in the spring/summer.
It will be rough for a bit without the upstairs rental income and/or the eviction expense, but you'll be glad you did in the long run. Believe me.
My vote is for ripping off the proverbial band-aid.
@Nicole Frawley - congrats on having a duplex under contract! When inheriting tenants, you also inherit their leases. Legally speaking you can’t do anything until the current lease terms are met. AND, if there is no lease, then you can’t evict. You could still get rid of him, but takes longer and is more expensive. If he is a long term, no problem tenant, I would gradually increase his rent over time and by that i mean years. If he does decide to move out, what does your tenant turnover cost look like? How much will you have to spend on rehab to gain that $500/month? Might be worth keeping him at the lower rents.
its already part of our contract to have lower apartment tenants out before closing. we've asked they do the same with the upper now after consideration. they wont be giving notice until we have our mortgage commitment.
there's also no lease. they're month to month and i dont have to do any rehab to get it to 500 a month. he was a friend of the owner and took care of lawn and the snow removal which is why he was at 275
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