How to help currrent tenants when you puchase a property, and the new rent is to high

[Sean Skiver]

Buying units where I am is often owned by older landlords that have left the rent very low. To create cashflow after rehab the rent is increased to market price and that tenant is unable to afford new rent. 

I know it's business, but we always want every deal to work for everyone. 

What are some creative ways to help the current tenant during the transfer of ownership?

[Theresa Harris]

Depending on the extent of the rehab, you can hold off on the rehab until the unit is vacant and not increase the rent as much (ie wait to pay $50K in rehab for 2 years and not increase the rent $200). Ie you are increasing rent in part to pay for the rehab, so don't do the rehab.  Gradually increase the rent or be flexible in terms of them moving giving them time to find a new place without penalty of breaking a lease.

[Jonathan Greene]

Listen to the episode of the BP main podcast with Dion McNeely. His strategy is for this. You present them with a notebook of rental comps and the rentometer print out and ask them to suggest their new rent. They usually choose about $100 below the market rent. That is a win and is usually way higher than the old landlord rent.

Once you show them data and allow them to be a participant, you are working together. If they choose something low, they are going to be a pain and it's time to get them out.

[Sean Skiver]

Thank you both for the responses! I  took this information and added it to our purchase process considerations. I just want to take care of the people, didn't get into the business to put people out of their homes. These are some creative ways to make the deal work better for all parties involved.