What to say to exising tenant wanting to move into renovated unit

Question

Hello everyone,

I have owned this quad since earlier this year. This one is my first multifamily property in central New Jersey. At the initial stage of renovation in one of the units, one of the tenants in other unit saw the rehab was being done and asked if he can moved to the renovated unit once the work is done. Eventually the request was rejected since it would only mean a turnover which I, as a landlord, want to avoid in general. I understand the tenant's motivation, the new unit is only a hundred dollar more expensive than what they are paying for their current unit. but planning on acquiring more rentals, especially multifamilies, I don't want to allow the existing tenant to move into the renovated unit, and the new unit will only be for a new tenant.

Has anyone encountered this issue or similar ones and I would appreciate any suggestion on how to properly respond to such request? Thanks everyone!

Paul

Jill F. · Answer

We let everyone know our ultimate goal is to renovate all units and let existing tenants have first chance at units before we market them.  We tell people in unrenovated units that we are for now, waiting for normal turnover in unrenovated units but eventually we will run out of units to renovate so please take a look at our renovated options as they become available because eventually we'll run out of vacant units to renovate...

Matt Devincenzo · Answer

I'd likely have allowed him to move and turned his old unit over as well. Obviously details matter in this scenario, and maybe the return wasn't there for you, but typically if I'm increasing rent then it should be worth the turnover cost. If he was already interested you may have been able to have gotten an additional $50-100/mo.

Of course if you just don't want to do that period, then I would have simply said 'no' and left it at that.

Ashley Glinka · Answer

We are in a similar situation in a duplex we have but the current, and only tenant, is only paying $636 for her unit.  She did say she would like to stay and wants to move into the back unit as soon as we get it renovated but the numbers just won't work for her.  The new rent will be about $1150-$1200/month and she won't meet our rental criteria (3 x the monthly rent in income and 600+ credit score).  Unfortunately, we will have to give her notice soon so we can get her out of the front unit once we are done renovating the back unit.  Had she met the criteria-we would have gladly let her stay.  It doesn't matter to us who is in the unit as long as they meet our criteria.

Theresa Harris · Answer

Can you fix up the unit they are moving out of and rent it for more? If you've done a lot of renos, and extra $100 in rent doesn't seem like a lot of course I don't know what the rent is ($500 vs $1500).  Let them move into the new unit with a new lease for a higher price, then turnover their unit and get it rented.

Scott Esmail · Answer

You can say it rented and hope he does not find out its not. Or allow him to move over and then reno his unit.

Amit Chawla · Answer

Personally I would let them move.  Especially if they have been there a long time.  Finding a good tenant is costly and time consuming.  If you have a good tenant who is willing to pay the higher rent, I think its a no brainer to try and keep them.

I just purchased a 12 unit apt building, all units are planned to be updated.  The building was supposed to be delivered vacant yet seller did not do their part and I ended up with roughly 8 tenants.  After talking to some about half are willing to move into renovated units and pay my market rent (which is significantly higher than what they were paying before).  They liked the renovated units and most have been in the building for over 5 years.

Good tenants and they pay on time.  Willing to pay what I am asking for just spending a little and renovating the units.  This allows me to keep tenants (market rate), renovate their old units and get them on new leases.  If I do not go this route, then trying to evict them will take additional time and money and may delay my renovation.

Nick Sanders · Answer

I agree with @Matt Devincenzo

Unless there is compelling reason not to I would allow the tenant to move into the unit especially if they are a good tenant. Did this on My previous remodel of an 8 unit, and presently doing it on a 16 unit complex. I specifically send out a letter to all the current tenants informing them a unit had been remodel and if they are interested they could relocate at a discount on the newly renovated rent if the rent increase was going to be $200 or $250 they get it for $150. I generally give them 1 or 2 wks to agree before putting in on the market and that is in the notice letter. That way I could remodel the other units and ultimately get all the rents up. That is, if your goal is to remodel each and raise rents. Just my two cents.

Bjorn Ahlblad · Answer

I am surprised the renovated unit is only 100 dollars more. Please check that out. If it were in my building I would let them move in the renovated unit and then renovate the other unit, have a better building make more money. All the best!

Paul Chae · Answer

It was a little unique situation as I commented above, with the tenant having already been paying fair market price for his rent. So if I want to decline the request from tenants going forward, I guess I would either just say no or let them know that it's for someone else.. anyhow I ended up allowing the tenant to move into the renovated unit so he will move probably sometime next month or December. Appreciate all the great suggestions! Cheers

Paul Chae · Answer

What happened was this tenant's rent was already pretty close to market price and the unit he is living in only has one bedroom and somehow there was parking space in the lease although he does not have a car. Now he has been wanting to move to a 2 bedroom unit, not necessarily for larger sqft, but for more privacy with other family members. Writing this, I am thinking maybe I could counter offer with a new lease without the parking space for lower rent and see what comes back.. But of course I get the idea of getting both units renovated and maximize NOI, which is ideal for the most part : ) Thanks!

What to say to exising tenant wanting to move into renovated unit

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