Hi All -
I've been an investor for a few years with 6 flips under my belt but I'm moving to a buy and hold strategy due to flips becoming less profitable in my area. I'm closing on my first duplex in a few weeks and was hoping I could get some tips that may help me avoid any mistakes regarding tenants. One unit is occupied and the other is vacant.
- What records should I be requesting from the current management company?
- The current tenant is on a month to month at well below market rate. They're at $550/month when they should be at $650 at least. They're good long term tenants. Should I increase them gradually or just go straight for the $650?
- Other than a new lease, what else do you provide the existing tenant? I was thinking of sending them a welcome packet to start off on the right foot.
- Got any other tips??
I've posted a couple times recently and really appreciate the advice the forums have offered, so thank you for your time and insight!
Hi @Bryan M. here are a few tips I have for you:
I would ask the current PM company to send you everything they have on that unit- Tenant application, lease, any violations, history of payment and repair requests.
- Inheriting tenants is challenging the majority of the time but they could be good tenants I think once you get the whole file from the PM company and you have a conversation with them you'll get a feel for the type of tenants they'll be. I would knock on the door and introduce yourself. I would raise it straight to the $650, you can justify that to them if you'll be making some repairs or beautifying the building maybe. Not saying it has to be justified but it helps them understand when you have a reason. Make sure you get their deposit transferred to you from the previous landlord or PM company.
- If you have any utilities that would place liens on your property if they aren't paid I'd make sure that's built into the rent price and make sure you pay for it. Any other ones I'd make them responsible for. For current or future tenants I always say I work with the owners or am only 1 of the owners. If you say you are the landlord you'll get all the sad stories, and when you have to deliver not so favorable news to tenants you can explain that's what the owners are asking for so you're never the "bad" guy.
Hope this helps.
And read the thousands of forum threads on Bigger Pockets that address all these issues. There's a wealth of information here to be mined.
@Bryan M. I agree that you should raise the rent immediately. Incremental increases make it more confusing and more likely the tenant will try to stay longer than they can afford to. Either they can afford it or they can't.
It's probably too late but I always recommend you complete an estoppel certificate (also called estoppel form or agreement). The estoppel certificate is a form filled out by the tenant and then confirmed by the Landlord. It's supposed to ensure there are no surprises after closing. For example, you buy the place and the tenant could claim the Seller allowed them to paint the walls black or that their security deposit was twice what the Seller claimed. How will you know? An estoppel certificate fixes this problem.
Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.
Here is an example and explanation: https://eforms.com/rental/estoppel-certificate/
Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.
Once you close on the place, you should provide the tenants with a letter that introduces yourself and gives them basic instructions for paying rent, communicating with you, and submitting maintenance requests. Personally, I would avoid getting into the personal stuff like talking about kids or how you're going to be the greatest Landlord ever and really want to take care of the properties. Keep it short and professional.
I always do a “move in checklist” with inherited tenants right after close. I tell them it’s to protect them and me, and to address any deferred maintenance immediately. It lets them start from scratch and gives you a record of what condition the property is at that start. Can’t charge anything at move out if you don’t know they did the damage.
And definitely read the thousands of posts/articles on the landlord forums on BP. I started by skimming headlines, and then eventually reading them all. You never know what you don’t know until you know it.
Month to month. It solves most everything.
Build as indestructible as possible. Carpet = the Devil.
Verify your tenants are not the sort to tear the place up (meaning a few inspections in the beginning). That said, watch out for the tenants that somehow have components wear out faster than other tenants, you might have a saboteur on your hands that wants to accelerate replacements for their benefit (a catch 22, sometimes your super-clean tenants want everything to be better all the time).
All issues other than tearing a place up are manageable and in general, inexpensive or free to remedy.
My style is to let the little stuff go (or be extremely patient with the remedy) and not be too much of a hard ***. I've found I would have to evict every tenant I've ever had if I made an issue over every little thing. Then again I rent in the hood, but I would guess the entire renting class has it's issues. To each their own, plenty of landlords allow themselves to get bent out of shape over every little thing.
Last and not least, do not delay when it comes to serving late notices and filing court documents. You are going to hear every story and have empty promises made on a regular basis with your problem payers. My style has been to offer a small amount of leniency, a good dose of patience (meaning I let people acclimate to forming paying rent on time as a habit) and then finally, zero mercy when it is finally time to let someone go. However, when it is time to let someone go, I try to do it with as much understanding, kindness and accommodation as possible. Just because they pissed me off to the point where I decided to get rid of them, does not change the fact they are people and my property is their home. Moving sucks and I do what I can to make that go smoothly for everyone.
You'll be fine. Research as much as you can, and you'll develop your own style over time and trial.
Almost forgot the most important thing, learn your local landlord/tenant laws backwards and forwards like yesterday.
Don’t believe their stories
Screen screen screen
If your going to throw them out ..then DONOT wait around hoping things will get better listening to their BS stories . Evict fast donot pass go donot collect 200$ -get them out and get the paperwork filed .
All this information is extremely helpful. Wish I would have known about the estoppel letter. I'll make sure to use that next time.
I'm sure I'll hit some bumps in the road but I'm glad to have all your experience and insight to get me through. Thanks guys.