I was hoping others could weigh in on their opinion,
My wife and I are about to move into our first investment property which is a duplex. The renters on the other side have “ really moved in” with a lot of stuff and it looks like the previous owner didn’t do much upkeep, so when the current renters move out it will need some TLC. Currently, they are on a month-to-month lease which happens to be about $150 under market value. Here’s where my concerns lie; with Covid and moratoriums in place would you: 1) Let the tenants know you will not be renewing their lease and risk them not paying rent while being in the moratorium time, but now possibly able to renovate the other unit? 2) Raise the rents and let the current renters decide if they want to pay the new rent or move out (while still running the risk of renters not paying)? , 3) keep the current rent in place so as to not lose any rental income due to vacancy? or 4) another option my brain is not coming up with?
Looking for any guidance or thoughts to mull over in this situation,
any option you give the tenant, they might decide not to pay, if the tenant is not a good one. as far as your options, i would start with the end in mind. If you have the funds to cover debt service if they were to move out, then you can choose not to renew the lease. If you need to keep receiving the current rent, to build a little more cushion then i would keep the rent. as far as the last option, if you can carry the hold over cost and want to do a some TLC to the place then you can raise the rent and make the tenant choose if they want to stay or move out. that being said raising the rent $150 is pretty steep, so make sure you raise it to a reasonable amount if you go that route.
Thanks for the insight Bernadeau,
I like your thought of keeping the end in mind. Sometimes it's easy to get lost in the multitude of options. I think that we are leaning towards giving them the option of renewing at a higher rent, but if they end up walking we are happy to start the upgrades and justify our rents to the next people a little better. With Covid moratoriums, I'm definitely going to speak with a lawyer first on how best to handle the situation.