Inherited tenants in new 4-plex

4 Replies

Inherited a tenant that was a relative of previous owner. They have no damage deposit or lease. I plan to raise rent as its well below market. With no lease, I am worried about squatters rights. The building is a 4 plex and cash-flows. What's the best way to approach this conversation.

It sounds like you've already closed on the property. Ideally, I would have tried to at least get a month to month agreement in writing prior to closing. I would go ahead and start the conversation about getting them on a lease. Maybe start with a moderate increase from the current rent if they seem to be a good tenant. You can do a shorter term lease with plans to increase rents at each renewal. I'm not sure what the regulations are where the duplex is located, but maybe you can put some pressure on them and say that they either sign a lease or move out. (If that's legal).

 Hopefully they will be cooperative!

Time to "landlord up..." Send the tenant a 30-day notice that the month-to-month tenancy is being terminated but you welcome him/her to remain with you under a 12-month lease. Advise that the new rent will be $x effective on day 31. Ask that he/she contact you within the next 3 days so you can go over details and address any concerns. If they elect not to remain a tenant, they will need to vacate on day day 30 and it will be leased to a new tenant starting on day 31st. (I like to mention this because it takes away the idea that no one will be moving in for a while...so maybe hang on a tad).

Be matter-of-fact because it really is just a fact of business that leases are engaged and rent established.  You won't know what you have until you give notice. I would not have closed with a non-lease tenant in place but if I did for some reason, my goal would be to get them under a lease, under market rent - or start the parting of ways.  

Congrats on your acquisition.  Hope this helps.

I would not push them for a new long term lease and I wouldn't push them for a big rent increase. I would get them on a new MTM lease with maybe a slight increase but I'd consider no increase. And here's why... sometimes an inherited tenant can be a great tenant that you don't want to lose however you don't know that. On a MTM lease (in Arizona) I can give them a 30 day notice of rent increase or notice to vacate or notice to change the term, I can do whatever I need with a 30 day notice when I have that MTM lease in place. 

I will usually do that for 3-4 months to get a feel on that tenant, then act appropriately. But with nothing in place at all, yes you are dealing with a squatter and those roles are different. That's how I work with all inherited tenants when my clients acquire new properties.

I agree with @Dick Rosen . I would start out by putting them on a month to month lease, at the same rent. They have absolutely no reason to fight you on that - it should be simple enough. After a period of time where you feel like you know what sort of tenants they are, that will give you a fuller picture, and more information on what you want to do next. Since they are on a lease at that point, it will be easy enough to raise the rent incrementally. It will just take a while longer to get it up to market value.