Newbie Purchasing Tenant Occupied SFH

6 Replies

>Do I get the deposit the tenants gave the present owner at my closing or do I have to request a new deposit?

> I plan on raising the rent by $100. Even that is under market value.  Do I let them know now before closing (seller giving me the phone number) or do wait a couple of months then raise it?

The deposit can be deposited in the escrow account by a present owner for you to receive upon closing. Even if the market rent is higher then the actual rent at this moment i would not raise the rent by $100. Are the current tenants on month to month or on a 12 month lease? You can raise the rent gradually. if they are on the month to month you will have to give them 30 day notice if they are on the 12 month lease you can renew the lease and raise the amount by desired amount. but you are risking of loosing your tenants if they decide to leave. You need to look at their current lease to make this judgement.

@Alex S. They are month to month and have been in the property for 2 1/2 years.  My understanding is that they were interested in buying the home at one time but couldn’t get financing.  I’m not sure if it was due to credit or legal status.  They really like the house.

If they are M2M I would give notice as soon as you take ownership. With inherited tenants you need to take immediate action to raise their rent to full market. If they are not suitable tenants, can not afford to pay market rent, you want to clear them out asap and get a good tenant in place. The idea of slowly inflicting the pain of rent increases over time or charging below market rent is a amateur approach to business. You can do it but why would you want to operate your business where you are supplementing your tenants rent. That is charity not business, a hobby investment where money is not important.

With inherited tenants you put your rent to full market and clean house if necessary. If you want good solid tenants you want tenants that can willingly pay full market.