New Purchase & Tenant Wants To Stay

[Connor Nichols]

Hello Bigger Pockets! 

This is my first post as I have just made my first deal!  First off, I just want to say thank you to the founders for creating Bigger Pockets.  I wouldn't have had the courage to make this first deal happen if it wasn't for the access to so much great information from this website.  I also want to say thank you to all the experts for giving back and answering to post like this one.  It means a lot to me and I know all the other newbies are thankful as well. 

I close on a 3 bedroom, 2 bath (1320 sq ft) condo next week.  The seller notified me to tell me the tenant would like to stay.  My first thought was pure excitement.  To have a tenant in place for my first property is a ideal situation.  After research, I found that the lease agreement would transfer over to me when the closing happens next week.  I just received the lease agreement and it now set up for month to month due to this tenant living at this property since 2017.  I also found out that this tenant has been great to work with and has paid on time every month since living there.... so needless to say my goal is keep this tenant in place. 

Here is the situation that I ask for feedback from the BP community. My gut tells me I should have the tenant sign a year lease agreement with me.  The tenant is paying under market average for the property ($1150 per month).  Another similar unit (same beds/ baths/ sq ft) leased for $1300 per month this year.  I'd like to achieve an increase but my #1 priority is to keep this tenant.  If you were in my shoes, how would you handle this situation?  Would you allow them to stay month to month but raise rent right away?  Would you require a year contract, and slowly raise rent per quarter until reaching $1300?  Or perhaps you would go about it a completely different way?  Thanks for any feedback you can give! 

Connor Nichols