Tenants want to stay after purchase

6 Replies

Hi,

I just bought my first investment property in Boise, ID! The house is currently occupied by tenants who want to stay in the house until they find their own house to purchase (they were supposed to move out June 30th, but asked if they could stay until they found a house). They are paying slightly under market rent rate. That said, I'd like to raise the rent by $25-$50 per month and put them on a 12 month lease with the condition that if they found their home, they can move out once we find a replacement tenant (and we would focus on securing a new tenant ASAP).

I would love some insight from this group as I am new to this and want to do the right thing!  

That sounds fair but I personally would give them 2 options. Maybe extend for 1 month through July so they can find a home or they sign a 12 month lease at the new rent rate. I would hesitate to give them the option of canceling the lease if they find a home. Make them decide now. Chances are they’ll leave you with an empty unit in the winter when it’s harder to fill. Just my advice.

I would not do what you are thinking. If you want to keep them put them on a month to month lease and if they do not move out by the fall I would give them the proper notice that you are not renewing to get them out. You do not want to be stuck with a vacancy in winter because it will be harder to find a new tenant. If they buy a house in the winter you could be in a difficult situation.

I suspect if you pressure them into a 12 month lease they will just break it once the buy a house and then you will have to chase them in court to try to recoup your owed money for the remainder of the lease.

The condition to cancel (if they found a house) is not really enforceable.  Situations change all the time, they may move because they found a new job at a different location.  That shouldn't matter to you.

Offer them a one year lease at $X/month, with a standard penalty if terminated early, or a monthly lease where both parties can terminate with 30 days notice for whatever reason, at $X plus some more / month.

A kick out clause when a house is found is too easy an excuse to use to break lease for any reason.

If they are good tenants, then I don't see what the problem is. If you raise rent by $25-$50 per month, then your net is $300 - $600 a year. Are you managing this property yourself or are you using a property manager? A property manager will charge a fee to place new tenants there....you're also going to have to carry utilities while the home is vacant.

If the tenants are happy, let them stay and enjoy the revenue while you stash that cash to be able to re-invest it into the property after they vacate.  Once they do, then spend the money to upgrade the interior so you can charge a premium over market for a nicer place.

If they aren't paying rent on time or if they are trashing the place, then don't give them the option and ask them to leave.

If the tenant is a good paying and clean occupant, raise the rent $25-$50/month on a month to month lease with a 30 day written notice to vacate. A notice clause that can be submitted by either party. If you force them into a 12 month lease, they will still leave whenever they want and like mentioned above, you will just chase them in the courts for your money which can be exhausting unless you work with a good collections attorney. If they are not paying on time and are not clean, get them out sooner that later! This type of tenant will cost you everyday they are in the property. Get them out, rehab, and increase the rents to the top end true market value. Good luck!

@Sandhya Gorman Welcome to investing in Boise!  I would highly recommend you do everything you can to make sure you don't have a vacancy happen October - January.  Yes - if you are using property management, they can help advise on this. Good luck!