Raise Rent for Tenant Paying Less Than Lease

6 Replies

I am hopefully going to get a duplex under contract next week, each unit already has tenants on current leases. In one unit, the rent is 2,200 a month on the lease, which the tenant was paying, but lost his job and the current landlord is allowing him to pay 1,800 a month. There’s also wording in the least that says the tenant can renew the lease at current rates. My question is, if I take over the property, should I wait until lease renewal in November to ask for the 2,200 a month, or sooner? The 1,800 is an informal agreement between the tenant and current landlord, the lease says 2,200. Thank you so much for any advice or thoughts!

Can the tenant afford it?
Can you afford to loose the tenant? 
Are they taking care of the property?
How long will it take to get a new tenant? 

I don't like turn over. I would inspect the unit and if the tenant is taking good care of it I would talk to them about the likely hood of them finding a job. I would explain that I need them to stay in contact with me and work with me as I cannot leave the rent that low for long. I would figure the time frame based on the answers to the question above.  If its vacant for 1 month you loose the $1800. So, you can afford to let him keep it at that rent for 4.5 months and not lose a thing. 

Unlike Gordon my opinion is that a tenant paying under market is a bad tenant. I never keep bad tenants and prefer to take care of my business. Tell the existing landlord that as a condition of purchase he is to immediately inform the tenant that he is responsible for full rent as state in the lease. You could be facing a eviction either way. Unless of course you are operating a not for profit or subsidised housing. The present landlord is a lazy idiot that should have gotten rid of his tenant long ago.

I sincerely hope you are negotiating a discount on this property to compensate you for his incompetence. 

A lease is not worth the paper it is written on if it is not enforced.  

Agreeing with @Thomas S. but something else to consider @Rob Stein is tenant turnover costs. Assuming you’re legally allowed to get rid of the under paying tenant, how much $$$$ is it going to cost you to place a new tenant? Think of remodel, vacancy, eviction expenses. 

Interesting question. Hope you’ll tag me on your follow up post regarding the outcome. Good luck on your acquisition. 

@Gordon French , @Thomas S. , @Jay Helms thank you all so much for your insight. It's a sticky situation, I'm speaking with my attorney before making my offer to make sure I have all my bases covered. 


Due to the situation of the seller, I have the ability to make a very aggressive offer. He owns this duplex free and clear, however, has not paid taxes in 4 years, there's a 3rd party lien on the property and he received a notice a month and a half ago stating they are considering starting foreclosure procedures. That's a long process in NJ, so if he accepts my offer and I take over the property, I'll have time to redeem the lien. So, his options are to take my offer, or lose the property and have nothing. 


I'll be speaking with my attorney, but to play it safe, I am going to approach this as if I am going to be accepting the current below-market and below-lease rents until renewal, and will be making my offer based on those numbers. I will emphasize to the owner that I feel for him in his situation, but due to his negligence and allowing the tenants to pay these rates, I am taking over a property with these rents and have to base my terms on that. I still plan on having a discussion myself with the tenant about his situation and see what can be done. Best case, I can get him paying the 2,200, or at least closer to it, worst case, he stays at 1,800, and when the lease renews I'll increase my NOI on great terms. Eviction can be a pain in NJ, so if possible I'd rather go into this with not having to start with an eviction.

Thanks again for your input! If anyone else has some thoughts please do chime in, and I'll update after the offer is made. 

Actually the best case regarding the tenant is to get him to leave in a way that you can find a replacement tenant without a vacancy. This tenant can not afford to live there any longer and will place your investment at risk.

Bite the bullet and make the correct business decision instead of concentrating on carrying a weak tenant that places you in jeopardy. 

Originally posted by @Thomas S. :

Actually the best case regarding the tenant is to get him to leave in a way that you can find a replacement tenant without a vacancy. This tenant can not afford to live there any longer and will place your investment at risk.

Bite the bullet and make the correct business decision instead of concentrating on carrying a weak tenant that places you in jeopardy. 

I agree completely. Examining the lease, it says I can evict if the tenant does not follow the terms of the lease, including paying rent. I'd rather not start off with an eviction and possibly have an empty unit. Currently, my plan is to speak with the tenant, and give him a 60 day window to get up to market rent, and see if he agrees. If he doesn't, that'll give me lead time to find a new tenant, if he does, then my cash flow will have a solid increase. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.