Buying First Rental What Do I Do With Current Tenants?
I am going to submit a contract on Saturday for my first rental property. The people that live there now only pay $400 a month and this will not even cover the mortgage on the house. I will of course give the current tenants the option to stay but I do not think that they can afford a big rent increase. My question is should I put in the contract that the tenants have to be moved out of the house on or before the closing date or the contract is null and void?
Thanks for your advice
Michelle
Well, you may have a little problem... called a lease. Their existing lease must be honored by law. That said, if they are on a month to month tenancy, common if they have been there for more than the typical 1 year, you can, at the end of the first month you have legal ownership, advise them that the rents will be raised and they can pay or move. There is usually a 30 day notice expected of you in most states that I am aware of. I would be cautious, though. Is $400.00 market rent? Will you be able to get someone in at significantly more.... enough to cover your mortgage and EXPENSES? Are you sure this is the best deal out there? This is my area of expertise. I don't buy anything that does cashflow after all expenses, and that is 100% leveraged for not more than 15 years. Check your figures and be certain you are not overpaying. I do say this with the realization that market conditions are different everywhere.
Good Luck,
Shawn(OH)
I bought a few rentals recenlty-last 6 months, 4 props 10 units total- and am very new to this myself. I had been staying with low rents but do raise them 25.00 when I buy the prop. That way I still have cash coming in. As soon as I get a vacancy then I go right up to top market rate( after cleaning up the unit nic) And them when you do raise the rent again, the old tennant will realize they are still getinng a sweet deal. As tempting as it might be, It IS nice to have a unit rented w/good tennats who will not damage your prop and pay you on time, rather than some tennant who agree to pay 150.00 more and then have a reason that they do not have the rent, These same people will break doors, drawers, cabinets, scratch walls,etc....... The ols saying A BIRD IN THE HAND.........i HAVE A LADY WHO PAYS WELL UNSER MARKET by 200.00, BUT SHE TAKES CARE OF THE FURNACE EVERYDAY, SHOVELS SNOW, RAKES LEAVES, TO MAKE ''HER'' hOUSE LOOK GOOD. AND SHE IS KIND OF A BUZY BODY AND TELLS ME IF THERE ARE ANY PROBLEMS BREWing with other tnnant, also she lets me know about anything that is broken, needs repair, bulbs out, ect. In the begining I was going to spike her rent right up, but I thought about it raised it just a bit and she is still happy and I have less grief to deal with--If I raised everyones rent at once right up to markey sge would be gone aget 10 years, but she is still there and paying rent 5 days ealy every month----What is that worth to you??????[ Edited by jenkie01 on Date 03/04/2004 ]
If there isn't a lease in place advise the tenants that you are going to be raising the rent and give them the option to either sign a lease agreement for that amount or they can stay on until you find another renter who is willing to pay the new rent that way you at least have some money coming in while you are looking for a new renter.
You purchase property subject to existing leases. You must honor the terms of the existing lease, and may not arbitrarily evict a tenant nor raise the rent during the lease term.
If there is no written lease in place, then your tenant has, by default, a month-to-month tenancy. Your local landlord tenant laws give this tenant rights and protections as well. You can not just immediately raise the rent and tell the tenant to pay it or move out. Instead, the law prescribes a minimum notifiication period that you must give the tenant before a rent increase or a termination can go into effect.