Inheriting Elderly Tenants on fixed income and rate increases
I recently purchased a duplex with owner financing and the seller has 6 units (a quad and duplex) a few blocks away that she is considering selling me with a similar deal. The problem is that 3 of the tenants are elderly and on fixed incomes and the seller is concerned that they will need to move out when I take over and increase the rent. The current rent is well below the market avg and the property will have a CoC of about 15% with a conservative cashflow of approx $950 a month. They are currently paying 450-500 a month and I plan to increase it to $750/month. The seller is reluctant to sell if they have to move due to and increase. I'm looking for a creative way to work the deal so she will agree to sell. I am not opposed to traditional financing but I will most likely have the same problem. I would prefer owner financing for obvious reasons. Any help is appreciated.
Steve
Most Popular Reply
A seller doesn't have the right to choose the rents for the buyer. The seller is going to sell for a price that will basically force the buyer to raise rents. 15% is not enough to maintain the property, allow for tax and insurance increases, and make a profit
Really the best you could do is tell her that you need to raise rent because of the cost, but that you will give each tenant up to 6 months to find a new place to live, or they can choose to pay the higher rent and remain there. 6 months is really generous, gives the tenants plenty of time to find something else, but doesn't squeeze you into a position where the investment could end up costing you a lot of money. Actually 3 months would be fair but 6 months makes you look really really generous.