Evicting month to month tenants on new purchase

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Evicting month to month tenants on new purchase

Brian Orr
Rental Property Investor · Tampa, FL · Member since 2016 · 208 posts · 96 votes

If you all read my previous post you know I just acquired a 4 unit building in rural North Carolina. We discussed plans to raise the rent, allocate utilities to the tenants, pet fees, etc...

Well I just met with all of the tenants individually, all of whom are on M2M. Early in the conversation I let them know I would not be accepting cash as the prior owner did. This alone was met with near rage about having to figure out an app or having to pay $1.60 extra for a money order or 2% at a cash deposit station... I never even got near the point of raising the rent $55/month, pet fees, no more smoking, etc... Needless to say I think I need to take another route.

The challenge here is getting the tenants to realize the old guard is out and new rules are in place. I'm willing to give them until jan 1 to enact the new policies and rates, but I know I'm being met with high resistance, and I fear they'll keep retreating back to "this wasn't how we used to do it"..  I wanted to ask what you all thought of this plan:

I want to give notice of termination of the leases this week, effective move out December 31 (This is more than the 30 days required by NC law). With that, present them with a rental application for the new lease to begin jan 1 with all of the policies and rates and allow them the opportunity to choose to apply under new management.

Of course I hope they'd like to stay, but if not, the place could use some updating and I can likely get new tenants in at $500 once that's done. 

It's 7am while I'm writing this, and I will check with my lawyer first, but nothing beats the BP feedback and experience.

Thanks in advance for your input!

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

@Brian Orr I would have avoided that conversation. If you give them some changes today and more changes tomorrow, it will feel like an endless barrage of changes and you'll have an uphill battle.

I recommend a short, professional letter that explains where you're headed, to include a pet-free and smoke-free property. I think your plan is pretty solid. Give them notice that their current lease expires December 31st. They have the option of moving out, or they can apply and - if approved - sign a new lease prior to December 31st and continue renting under the new terms.

Make sure your screening standards are already set and screen every adult. If they have pets, you may consider charging an increased rent rate. People with pets are less likely to move because it's hard/expensive to find pet-friendly rentals, particularly in your price range. Spell out the acceptable methods of payment and that you expect timely payments. You don't have to be mean about the changes but you should be professional and fair.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    @Brian Orr I would have avoided that conversation. If you give them some changes today and more changes tomorrow, it will feel like an endless barrage of changes and you'll have an uphill battle.

    I recommend a short, professional letter that explains where you're headed, to include a pet-free and smoke-free property. I think your plan is pretty solid. Give them notice that their current lease expires December 31st. They have the option of moving out, or they can apply and - if approved - sign a new lease prior to December 31st and continue renting under the new terms.

    Make sure your screening standards are already set and screen every adult. If they have pets, you may consider charging an increased rent rate. People with pets are less likely to move because it's hard/expensive to find pet-friendly rentals, particularly in your price range. Spell out the acceptable methods of payment and that you expect timely payments. You don't have to be mean about the changes but you should be professional and fair.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    8Reply
  • Brian Orr
    OP
    Rental Property Investor · Tampa, FL · Member since 2016 · 208 posts · 96 votes
    7y

    @Nathan Gesner Ok great, thank you. Yes I didn't quite have the conversation it may have sounded like. It was just a first meeting and essentially a scout of the property and conditions. I avoided all of the "changes" conversation but the current owner has them on a "rent due by the 1st, but late after the 10th". So of course none pay until the 10th. they were all asking if i was there to collect rent etc... so I just let them know that I wouldn't be personally collecting it.

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  • Adam SchneiderPro Member
    Lender · Raleigh, NC · Member since 2012 · 955 posts · 639 votes
    7y

    @Brian Orr First, brush up on GS 42-14. MTM tenants only require a 7 day eviction notice, unless it's a manufactured home, in which case it's a 60 day notice. Please don't ask me why MH's have a 60 day notice provision in NC...I have no clue. Second, it's common for new landlords to transition to different forms of payment...what's funny is the psychology of the tenant (resistance to change). The truth is that electronic payment (lots of different services/options) are so much more convenient for the tenant as well as the landlord, and are usually met with appreciation from the tenant. If you make changes to all lease agreements at one time, and all move out at essentially the same time, would that be problematic? Or, if you didn't change all leases at the same time, would that cause headaches re potential preferential treatment?

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  • Wesley W.
    Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    7y

    I automate my rent collection by providing my tenants with a bank account number.  They can pay via online transfer, or walk in and pay with cash, check, MO or whatever.  This is spelled out in my lease as the ONLY way rent can be paid.

    Given your strategy, you just may end up with an empty building on January 1st (or, worse yet, some non-paying holdovers you need to evict) - not ideal timing as there are less people looking for apartments that time of year (at least here in the NE).

    If the above paragraph gives you pause, you could keep everyone as is, and tackle the unit with the rent farthest from market rent (or biggest PITA tenant) with a new lease and rental rate.  A few months later, do that one the next one.  If someone bawks and moves out/needs to be evicted, you resolve that situation, meanwhile maintaining the rest of the building's revenue stream.  Then, on to the next unit...

    Inherited tenants almost never work out, in my experience.  They can never overcome that "I was here first and this is how it's done" chip on their shoulder.  I liken it to school children that have a substitute teacher in their classroom, whom they give no respect and challenge at every opportunity because he/she is constantly compared to the regular teacher's policies/demeanor/management style.

    Good luck!

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  • Richard Sherman
    Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
    7y

    @Brian Orr I agree with @Nathan Gesner @Wesley W. and @Adam Schneider .  I would add a couple of points from my experience (which includes buying several 4-7 unit properties with similar issues as well as some larger and one 32 unit with a LOT of these issues.

    1. Raise rents asap to market or near the market.  You want that income to help shield from some of the potential issues (vacancy, repairs etc.)  If people you want to leave decide to leave because of new rent, great, they just saved you some hassle of notice.  Some will stay and if they stay at market rent and no renovation, even better.

    2. I like @Wesley W. strategy for having them pay directly to the bank account, BUT I will give you the caveat, that you need to make them put their name on the deposit slip every time AND email/text you or PM a picture of the deposit.  I guarantee people will forget to tell you they paid or the bank will tell them they can't deposit, can't deposit cash, or they will not be able to look up the account number etc...most of which are just bank teller issues...but , well it happens...these things will happen so be prepared.  This strategy also does not scale well.  4 deposits is fine...65 deposits...not so fine as you will be trying to track down who did what (from experience.) I stopped it at 16 units doing this.

    3. The reaction to the not taking cash shows that there is a separation and boundary issue.  That you have to solve ASAP or it will extend to everything (following rules, repairs, access, everything.)  I have bought many properties from mom and pops who collected in cash and had a cup of coffee at the table and gossiped with the renters....this is what gets created, entitlement and lack of boundaries.   I tell any tenant I meet that I work as a PM/construction manager for a larger company and I do not make any decisions but I am just an employee.  Might be too late to do that, but with new tenants, you can.

    Do not be afraid, you will sort it out, buddy!  Rip that band-aid off, as Nathan said, do it all at once.   We bought a 6 unit property (BEAUTIFUL creekside, feels like your in the forest, but 5-minute walk to downtown Salem, OR) rents were anywhere from $600 to 1095 for 1050 SF 2 bed 2 baths with creek views, free laundry etc.....Everyone got the same letter (except the new $1095 guy who just signed a lease before we bought it.

    Rents going to $1095

    No more free laundry

    We are going to be doing repairs and changes

    Here is the new payment process

    We want you to stay, if you do not want to with the new changes, here is the process to give notice.   

    1 of 6 are leaving (I wanted 2 of them to leave as I am going to Airbnb 2 units and CRUSH I think  :)

    Sorry for the long post.  Keep it up, buddy!

    3Reply
  • Brian Orr
    OP
    Rental Property Investor · Tampa, FL · Member since 2016 · 208 posts · 96 votes
    7y

    @Richard Sherman that's all great info, thank you. So my current plan was to give them notice tomorrow actually, that their m2m would end in december. Following that, give them all the letter of new terms and rental applications. I feel this will serve many purposes as you'd know, but also address that separation issue you discussed... what do you think? 

    And secondly, would happen to have a copy of that notice you served? If so, is there any way you would share it with me for reference?

    1Reply
  • Richard Sherman
    Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
    7y

    @Brian Orr   I think that is a good plan.  Of course always make sure you follow your state rules for notices, time periods all that.   Here are two things I would point out.

    1. The next letter with new terms lay it all out there.   Make all the changes at ONE time, not over several different letters.  Also, make sure you pick your battles..i.e. if someone is already in a unit and has been there and has a pet (even if it is not on the lease) I would probably not be making a huge stink about evicting them unless the unit is just getting wrecked.  I WOULD be adding pet rent probably though (unless it is a service animal of course.)

    2.  If someone has been there for a while and their unit needs work, I would not be having them do an application again unless I WANTED them to leave.  If that is the case though just give them notice.  Having everyone apply again, run background when they are already there does not seem to accomplish much.


    I will PM you the notice we sent, it is pretty basic.

    2Reply
  • Jessica Bridges
    Tampa, FL · Member since 2018 · 60 posts · 47 votes
    7y

    Hey Brian, 

    Here are the 3 things I would do.

    1. Try to ask the previous manager/owner about each tenant. Who pays on time, who causes a lot of issues and who always has an issue with the unit. I never vacate all units unless I have to, that way you have some sort of cash flow coming in for repairs and other costs. 

    2. I go to the good tenants first. Introduce yourself, give them the new lease terms and rent amount. If they agree and sign that's awesome! If they do not, hand them a 30 day notice. Doing this takes away any chance for them to argue with you about old versus new rules. They've agreed to your terms. If they do not, supply them with the 30 - day notice immediately. 

    3. Issue a 30-day notice to the tenants you do not want to stay. I always take the blame off of myself to avoid confrontation. That way there are no arguments and fewer questions. 

    Feel free to reach out if you have any questions. 

    2Reply
  • Christian Montalvo
    Realtor · Dallas, TX · Member since 2016 · 21 posts · 19 votes
    7y

    Agreed with every reply on this post. 

    When purchasing our last 4plex (with m2m tenants) the night we closed I sent out two letters one introducing ourselves and another stating the upcoming changes (from Bigger pockets forms) to every tenant explaining that they had until November 31 to decided if they wanted to stay because new terms would occur staring January 1st. There was a slight rent increase for a 12 month lease, $100 for a 6 month lease and a $150 increase if they wanted to stay month to month. I then told them we would be charging extra for parking as well (this property has a 4 car garage in which two of the units take up all 4 spots), so they had their chance to move their cars (allowing only 1 spot/unit) or pay an extra $35/mo. Then we "lightened" up to the deal with a $50 Walmart gift card if they renewed for a 12 month lease... also, understand we looked at all rental rates prior to this and found out that these tenants always paid on time and were pretty quiet, my point being we wanted them to stay. The $50 giftcards were nothing compared to the cost of turning the places if they all moved out.  I also sent them a copy of the new lease to review if they had any questions. 

    24 hours later we went by and introduced ourselves in person to answer questions. A few tenants were upset but I think politely introducing ourselves pulled some of them off the ledge. We made it clear without sounding desperate that we were excited at the possibility of being their new landlords. All tenants signed with us. Things went so well we just notified everyone of a slight rent increase for 2019 and all tenants have agreed to renew. 

    1Reply
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