Advice on dealing with inherited tenants

[Ellen Feiss]

Hi Bigger Pockets,

I just bought a three family house in providence rhode island. It is owner occupied and I will be moving into the vacant unit. The building has 2 leases up in April 2025 for way below market rent (the difference is 600-1000 per month). I also plan to ask one tenant to vacate as I will be moving into their unit. I'm looking for any / all advice for best practices around how and when to inform tenants about the rental increase/request to vacate. On the one hand, I know they are all anxious about what the new terms will be - perhaps I should tell them ASAP (I move in at the end of this month and have a lease/occupancy agreement with the owner until then). So I could tell them now and they could take some of their ire out on the outgoing landlord. Or I could move in, get to know them a bit, and then tell them a month or so in (giving them all 8 months to plan for the changes). I worry the tenant I'm asking to vacate will be unpleasant. They are the kind of tenant who might try to challenge you. In that case it may be better to be mum until I must tell them (90 days before their lease ends I believe). At the same time it would be great if the tenant I'll ask to vacate moved out earlier.

My plan is to have face to face conversations about this and follow up with certified mail / official paperwork.

Thanks for any / all advice

[Ty Coutts]

Hey Ellen,

Congratulations on your new property in Providence! Firstly, transparency is key. It's generally advisable to inform tenants about rental increases or changes to lease terms as soon as practical. Since you're moving in soon, having face-to-face conversations can establish a personal connection and show your commitment to fair and clear communication. 

For tenants with leases expiring in April 2025, consider discussing the rental increase sooner rather than later. Providing them with ample notice allows them time to plan and adjust financially. You can outline the reasons for the adjustment, such as market rates or property improvements, and emphasize your willingness to work with them during the transition.

Regarding the tenant you plan to ask to vacate, approaching this conversation tactfully is crucial. If you anticipate challenges, it might be strategic to wait until closer to the 90-day notice period required by law. This approach minimizes potential friction while still providing sufficient time for them to make arrangements.

Using certified mail for official notices ensures legal compliance and provides a paper trail for documentation purposes. Hope this helps! Feel free to reach out with any other questions!

[Ellen Feiss]

Thanks Ty! This is really helpful. I will start with open, face to face convos. Moving forward, I'm wondering what you think best practice is for communicating with tenants. I know that certified mail is nesc for official notices like lease renewal, rent increase, notice about bad behavior etc but what about day to day stuff like repairs? I am planning to use email. I may create a repair request form. In a court situation, would email communication suffice for appropriate documentation for daily exchange? Many thanks for your help 

[Anthony Thompson]

Hi @Ellen Feiss I agree with @Ty Coutts that you should start with informal, friendly, face-to-face conversations with the tenants to establish rapport, especially as you have some lead time here before next April.

People don't like surprises or having to scramble, so if you are able to let them know your plans in advance, if they are reasonable people they should appreciate the extra lead time.

This is especially true if their rents are currently very under market - they will have sticker shock when they look at what other units are renting for, and have to spend more time finding a new unit (if you'll be asking them to leave).

If you have to move into one of the units yourself, I'm surprised you (or your lender) didn't make it a condition of the purchase and make the seller have the unit vacant for you.

Sooner or later in rental real estate, you will have to establish a relationship with an eviction attorney. And if you have a sense that one of the tenants could be challenging/unpleasant, I'd recommend consulting with that attorney to make sure you follow the correct process for providing the notice of termination etc. If you anticipate a possible fight, it's best to do things properly from the start.

Certified mail in itself is not a panacea, in fact IIRC most of the relevant statutes say first class (i.e., "regular") mail - but it has to be sent under certain timelines. That's why it's better to establish a relationship with an eviction attorney now, especially if you anticipate a possible battle with one of the tenants down the line.

It's certainly good that you're asking these questions now. So yes, I'd say the first step is to informally talk with the tenants face to face and get a sense of who will be cooperative and who could be difficult, and let that inform your strategy for each of them going forward.

[Ellen Feiss]

Thanks Anthony - I appreciate your response. The tenants in question have not given the seller keys to their unit and she for some reason does not have keys to it. Ofc this is a problem. It looks like I will move in next week and not have keys to that unit. They are currently being unresponsive to the seller about the key issue. If they are also unresponsive to me, I will have to change the locks on their unit. Do you think I should consult an attny before doing this. 

[Nathan Gesner]

Quote from @Ellen Feiss:

I recommend a face-to-face meeting where you discuss your plans and hand them written notice at the same time.

The property is bleeding money. I would ask them to leave early and offer to pay them to move. Do the math and see what makes sense. 

Example: rent is $1,000 below market and renter has eight months left on the lease ($8,000 lost). Ask them to leave early and offer them $500 for every month left. If they move out five months early, you pay them $2,500 on the day they hand over keys. If they stay until the end, they get nothing. You can even sweeten the pot by telling them they don't have to clean, and you will hand them their deposit on the day of move-out after a 10-minute inspection to verify there are no damages. 

It's worth your time to pay them to get out, then you can clean the units and rent them at market rate. You'll end up way ahead before April 2025.