Inherited Tenant Under Market Rent

[Caleb VanTimmeren]

Hello BP, 

Me and my partner are under contract on a 16 unit apartment building that is a major value-add investment.  All 16 units are currently rented, 14 of the tenants are month to month on their leases.  All the tenants are paying significantly below market rent for the area.  The building and all units could use improvements and repairs.  We are consider a few different options.  

1. Give 30 days notice and raise rent on all existing tenants that are month to month.

2. remove tenants that are month to month, renovate and rent out at market rent.

3. leave tenants in place until they move out or we ask them to leave and flip 1 unit at a time. 

A couple concerns we have is we have not placed or screened these tenant.  We want to change the culture of the apartment building and the people who live there but are unsure if we can do that with all the old tenants still living there.  

Any inputs and thoughts would be much appreciated. 

[Greg Weik]

@Caleb VanTimmeren If the tenants have good payment history, I would sign them for a 12-month term, pending a walkthrough inspection.  It's all about stability, IMO. 

Something to consider - I'm not sure how things are being handled with the pandemic in MI, but here in CO, it's impossible to evict anyone for non-payment of rent until the end of the year (at least.)  So part of your strategy might be to tread lightly if MI has any kind of similar moratorium on evictions (I believe the CDC hardship order is a nationwide consideration, but I'm not sure how MI is implementing this.)  If there are units with larger security deposits in place, that would factor into my strategy.