New Landlords, Inherited tenants, Upcoming renewal

[Billy Cha]

Hi All,

My Wife and I recently acquired our 1st rental property and inherited long term tenants along with the existing lease. Now the lease is set to expire soon and we'd like to increase the rent and incorporate a couple of our preferred policies in a new lease. Can anyone share their experience navigating the introduction of a new lease to existing tenants? 

We'd hate to scare them off with A. rent increase and B. a stack of lease documents but the rent is well below comps and has never been increased (going on 4 years) and the original lease was very general. I'm typically "by the book" and someone who likes to follow the rules strictly. My wife on the other hand is the compassionate one who is typically more accommodating. Now we're stuck with finding a balance of how much to increase rent and which policies to keep or modify knowing we don't necessarily agree with them. 

We'd love to hear what your experience was like. 

[Aaron Claybourn]

My Wife and I had the same situation on our 4plex we bought back in October. The rents had been at 750 a month (on month to month leases) since 2013 and two of the tenants have been there since 2013 and one tenant since 2014. I had a plan to leave the leases the same cause we didn't want to come in as the bad guys and raise rents. When talking with a seasoned investor he told me that its a lot easier to come in first thing and raise rents when the property is changing hands. Tenants expect it and should understand since they haven't had an increase in years. So I went with his advice and was pretty nervous going to the tenants. Average comps in the area are around 960 a month so I went to them with a year lease at 900 per month. Now that was a huge jump of $150 per month but I was kind of hoping at least one tenant moved out so I could renovate one more of the units. But that didn't happen. I went in and told them about the rent increase but at the same time told them about the improvements I was going to make to the property. I asked them what they liked/disliked about living there and what they would like to see improved. With me showing them I cared about there opinions and getting them excited about improvements it went super smoothly and everyone signed a year lease with me. Not to mention if they looked around they saw they were still getting a better deal on rent than they could find elsewhere. We have a great relationship with all them now and we will see here in October if they all re-sign. I hope this helps. I am still a new investor and learning everyday.