New to Real Estate · Member since 2019 · 39 posts · 14 votes
Hi All!
I have a question I'm hoping someone can help me with...
We are about to make an offer for a property that has tenants in place. The tenants have been there 10 years and 25 years (duplex). The rent is wayyyy below market (like half of what it is currently going for now). Both tenants are month to month. If we do take over we have to raise rents for the current tenant in order to make the numbers work for us OR we will have to make sure their lease is up prior to us taking it over, so we can rehab it and increase rent for future tenants.
We feel bad because they've been in this property for so long, but it is in a desirable location and a great find. How can we go about doing this? Is there a law that we cannot raise rents that high for them even though we are taking over the property? Thanks for all of your advice and help!
Real Estate Agent · Portland, CT · Member since 2019 · 761 posts · 849 votes
5y
Hey Alexandra,
No laws if the leases are up. Unfortunately this must be done sometimes and it comes with being a renter. Same thing applies to employees who complain when a new boss comes on board and makes a number of changes.
If you do close on the property, you could tell the tenants you would like them to stay but will need to increase the rent. You can put it just below market rents so they still feel like they are getting some kind of deal. If they agree to it and want to stay another 10 and 25 years while steadily increasing rents, its a homerun.
Also be careful with tenants taking advantage of COVID. One or both may decide they do not want to pay the higher rents and refuse. As of right now, not much you can do if that happens.
If it truly is a great deal with increased rents, maybe it is worth the risk. As long as their current rents are covering the mortgage and some expenses, you should be able to get the rents raised within a few months.
Investor · Kansas City, MO · Member since 2018 · 117 posts · 46 votes
5y
@Alexandra Sales I agree with @Brandon Rush. It is unfortunate but most tenants get it, especially if you give them enough notice and offer them a chance to stay. I would do just below market if you can make it work.