Tenants leasing agreement

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Hi friends,

I'm planning on putting a offer on this multi family house & the first floor tenants are on a month to month lease. The rents around here average $800-$850 (Connecticut). They are currently paying $500 & I'm wondering how to go about with the new lease. What's the nicest & efficient way of presenting an increase lease?

Very first time, so I’m learning the ropes!

Check your local landlord/tenant laws re increases, notices, etc

Then, decide if you are ok with vacancy and how much increase will pay for a months vacancy. Once you make that analysis, then send your tenant notice using the legal notice times (usually 30-90 days). 

Also be very sure your units are priced correctly otherwise you will have a hard time renting them and vacancy is the killer of profit 

Good luck !

@Pedro Echevarria - Unfortunately there isn't really a positively accepted response from a rent increase. Just explain that you're the new property manager and the owner is requiring that all tenants get onto a long term lease for market rent.

My market is a bit different than most though, so I'll first attempt to bring it to market, but if they truly can't afford it, then I'll negotiate to the top of their range (as long as it's close to market ($50~) and explain that it will increase again next year.  The $600 in lost rent is often not worth the $5k+ in turnover expense.  So I'll go in with the mindset to increase the rent as much as I possibly can WITHOUT losing the tenant (assuming they're one worth keeping).

@Pedro Echevarria

Wrote in the purchase agreement that you want the unit delivered empty. After close, make any necessary upgrades and rent it out at the highest rent possible.

Do NOT do the fake “I’m just the PM” excuse. If you can’t be honest with your tenants, why should they be honest with you? If you can’t stomach being the owner, hire a PM.

@Pedro Echevarria

Follow up....

Make sure you write in purchase agreement that no new leases are to be signed. You do not want the seller giving a friendly lease deal to these tenants on the way out the door. If they do that anyway, you can renegotiate the deal wherein the seller can absorb the below market rent amount for the term of the new lease. Or you can cancel the deal.

The best option is to make the Seller give the tenant notice to vacate. They can make you the bad guy so it's easy on them and it's easier on you because you don't have to deal with it.

If the Seller refuses to help, give the tenant the minimum amount of notice required by law (typically 30 days) that you are terminating their lease. Get them out, clean it up, raise the rent, and place your own tenant.

Do not raise the rent incrementally. That only serves to delay the inevitable and create a lot of room for additional problems. They can either afford market rate or they can't.

Don't feel obligated to give them three months to find a new rental. Give the minimum number of days required by law, which should be plenty if they don't procrastinate.

Don't feel bad. This is a business. If the Tenant is a decent person, they will understand they've been renting below market all this time and would be thankful for that opportunity. 

having the seller boot the tenant should be considered carefully. if this is a multi fam that is being financed based on the rent roll,  you will be hurting only yourself if you show the bank the units will be emtpy - they dont like that. also, what time of the year is it?  how long will your units be empty? how much reno needs to be done?

and finally check your local laws. some states do not allow tenants to be evicted for no reason. 

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