I’m a first time house hacker and I’m inheriting my first tenants. They seem really nice and seem to keep their unit pretty clean. Any advice as I close in just a few days?
Make sure to set expectations on the front end. You can be nice, but at the end of the day you're running a business and expect to be treated as such. If these tenants think they are your friend, they will have no problem paying rent late and calling you at all hours of the night because that's what friends do. You should also look to get these tenants onto your own lease. Best of luck!
Thanks Mike! I really appreciate the comment.
Make sure you get estoppel agreements signed by owner and tenants before you close.
Do a thorough inspection when you take possession, and take detailed photos. Damage before you take possession is difficult to prove without a detailed inspection report from previous owner. Damage post possession is easier to prove if you did your own inspection.
Last, set the expectations up front. Many tenants start asking for crazy upgrades when a new owner comes in. This is them trying to figure out how much of a pushover you are. Fix anything related to safety as necessary, but don't let them walk all over you. Make sure they understand rent is due on the first, late on the second.
Also make sure you get the deposit from the current owners. The tenants need to sign off stating that they will pay you the rent on Aug 1 and you need to let them know how to make their rent payment.
First, hopefully you have received a copy of their lease already, and your Purchase Agreement states seller to pay tenant damage deposits and pro-rates rents at close.
Then, listen to Andrew B. Do a thorough walk through of each tenants place. Think “Move in/Move out” checklist. Not only does this give you a picture in time of the condition at purchase, which is pertinent when they move, but it also gives you a list of what deferred maintenance needs to be taken care of. And make sure the tenants are with you during the walk through and they sign the inspection sheet.
Next, dependent on how long their lease is still good for, get your lease ready to go. While many people seem to think all inherited tenants are bad, I let each persons merits speak for them. I do not do background checks if inherited tenants sign a new lease, if you have several months evidence they are good tenants. I wouldn’t do this after just 1 month.
If the lease is month-to-month, be sure to keep it that way until you know them enough to know if you want to keep them, and also write up your own lease with your own rules for them to follow. Make sure to do everything in accordance with your laws and timelines.
DON'T MAKE FRIENDS - I can't stress that enough. It's okay to be neighborly, but when you become friends it's hard to be firm and then you'll get taken advantage of. Good luck!
Congrats @Daniel Steeves !
I also inherited tenants on my first house hack. Slightly different though since my house hack was a SFR and I moved in with my new tenants/roommates.
As already mentioned, set expectations immediately. This was the smartest thing I did. Both of my tenant were month to month. We signed new leases immediately with my new rent rate. One of the two however was not willing to accept any rent increase (he actually wanted a reduction), so that helped make way for two friends of mine who wanted to move in with me.
One common misconception with "setting expectations" is that you have to be mean or the bad guy. However, that's not true. Setting expectations is just establishing rent amounts, inspections, repairs, proper communication channels, times they can contact, what is and what is not an emergency, etc. Doing this removes an uncertainty and will help move things along. Once thing I've heard @Brandon Turner mention in BP podcasts is to shift the blame from "I make the rules and it works this way..." to "These are the rules I have to enforce because of my partner/associate/system...". This way you still set the rule, but align with the tenant at the same time.
Post an update in a month or two. I hope to read things are going well then!