Seeking advice on planning rehab with long-term tenants
Kristopher ToribioPro Member
Investor · Chicago, IL · Member since 2018 · 16 posts · 9 votesHi everyone,
I’m closing on a duplex in Irving Park this week and it is currently occupied by long-term month-to-month tenants with rents way below market. Plan is to force appreciation through renovation, raise rents to market rates, and house hack one of the units.
This will be my first rental property and wanted to see if anyone could offer any insight as to how to approach the rehab and exiting the current tenants. I’ve received several recommendations including rehabbing one unit at a time while keeping the other units occupied to minimize holding expenses, while others have suggested vacating the entire property upfront prior to renovations.
That being said:
1) What would some of you suggest and what are your reasons why?
2) Would 30-day notice +/- a week or two be sufficient? I’m thinking of possibly giving 60 day notice with an incentive if the tenant is able to leave within 30 days.
3) Do you hand-deliver your notices and require the tenant’s signature?
I’ve never given tenants notice before and can’t imagine a “Hey I’m the new owner just wanted to introduce myself, oh and by the way you have to vacate the property in 30-60 days” would go over very well.
Thanks in advance!
@Kristopher Toribio I have to second what @Matthew Olszak mentioned. For a duplex, there just isn't any good reason to keep a tenant in place if you are going to rehab. Follow the law, and give everyone 30 days notice. You will get push back, but believe me when I tell you that you are better served clearing the building out. I just recently made this mistake on a new building in Cicero, and I literally am regretting that I didn't clear the place out every single day. Although it may feel inhumane to ask people to leave, keep in mind that these same people would move out in one second if it benefited them. This is a business relationship you have entered into, and you need to be paid market value for the service you plan to provide!
First off, for a duplex yes, empty it out before starting work. Especially if the tenants are paying under-market rent.
Obviously the more time/notice you can give the tenants to move, the better. However with that being said, folks in this situation where they are paying much less than market will still likely be in the unit on the deadline with the excuse that they can't find anywhere (well...anywhere they WANT to move to and for an amount they WANT to pay). Grease that wheel by offering them a "bonus" of $x if they move out on time. And maintain communication with them about how you can help in their search - IE if they say they find a place but need $x for the deposit, it might be worth it to pay that.
In Illinois, you have to hand deliver notices to tenants. The notice also has to be written a certain way pursuant to the statute. You don't need their signature, you simply swear under oath in front of a notary that you did in-fact deliver it to the named person. Since the tenants are month-to-month, you have to deliver the 30-day-notice at least 30 days prior to the end of their current rental period. IE if their next rent is due February 1st, you'd have to have delivered the notice to them by January 2nd. If you didn't do so, you'd have to give notice by Jan 30 that their tenancy is terminated on Feb 29 (my understanding, as I'm not a lawyer). Its not 30 days from the notice date but rather 30 days from when their current tenancy period ends.
In a human way, just approach the tenants with your notice in your back pocket and explain that you purchased the property with the intent to rehab it, and need the property vacant to do so as the work being performed will be intense and intrusive. As such, you will need them to find another apartment by whatever date. Don't tell them they need to "move out" because mentally that plants a seed of doubt in their mind that they might be homeless, be sure to say they need to find another apartment so there is no doubt that they will be able to do so. Let them know you will be glad to give good references to prospective landlords and for them to reach out if they run into any problems. Then check in after 10 days or so to see how the search is going. At the end of the convo, give them the official 30 day notice, and explicitly state that you have to give them that because of silly Illinois laws and that it is just memorializing your conversation...doing so helps keep the conversation more casual vs adversarial.
To note: If you get a door slammed in your face, the tenant calls the police on you (happened to me twice now), or any other sort of aggressive response from the tenant, the approach will be completely different from that point onward.
@Kristopher Toribio I have to second what @Matthew Olszak mentioned. For a duplex, there just isn't any good reason to keep a tenant in place if you are going to rehab. Follow the law, and give everyone 30 days notice. You will get push back, but believe me when I tell you that you are better served clearing the building out. I just recently made this mistake on a new building in Cicero, and I literally am regretting that I didn't clear the place out every single day. Although it may feel inhumane to ask people to leave, keep in mind that these same people would move out in one second if it benefited them. This is a business relationship you have entered into, and you need to be paid market value for the service you plan to provide!
Hi everyone,
I’m closing on a duplex in Irving Park this week and it is currently occupied by long-term month-to-month tenants with rents way below market. Plan is to force appreciation through renovation, raise rents to market rates, and house hack one of the units.
This will be my first rental property and wanted to see if anyone could offer any insight as to how to approach the rehab and exiting the current tenants. I’ve received several recommendations including rehabbing one unit at a time while keeping the other units occupied to minimize holding expenses, while others have suggested vacating the entire property upfront prior to renovations.
That being said:
1) What would some of you suggest and what are your reasons why?
2) Would 30-day notice +/- a week or two be sufficient? I’m thinking of possibly giving 60 day notice with an incentive if the tenant is able to leave within 30 days.
3) Do you hand-deliver your notices and require the tenant’s signature?
I’ve never given tenants notice before and can’t imagine a “Hey I’m the new owner just wanted to introduce myself, oh and by the way you have to vacate the property in 30-60 days” would go over very well.
Thanks in advance!
For occupied multi5+ we renovate one unit and the common area first & give the current tenants the first opportunity to move into the new unit. After that everyone may either get a 30-day notice or a notice of rent increase. If it was a duplex we'd want the whole property cleared out at one time.