First Multi Family purchase when do you do the new lease and rent change?

Question

Hello Team,This is my very first post as I've been watching and reading others from the sidelines for over 2 years. I'm excited to be closing on my first multi family four unit property here in DC. The Closing date is 5/31/2023. My question is at what point do I get the existing Tenants to update the existing leases with me (if I do that at all) of course with their same current lease agreements in tact just my name changes over the current property owner. Also more importantly when is it ok to get them information to join Rentredi for me to be able to collect rent on the 1st? I have a feeling this should be done before the Close as the next day is the 1st of the month?ThanksAte

Alecia Loveless · Answer

@Ate Etim-Edet I’ve had to get the leases signed over to me for the lender at times which I’ve just done after the closing. I’ve taken my copies of the existing lease and made a second copy and met up with the tenant and just crossed out the old owner of managers name and had the tenants and myself initial it and put in my name wherever they had signed and done that to both copies and given them an updated copy. Unless it’s close to the end of the lease and you want a new lease or to terminate the lease then I would likely just let it go until the end. I also write an introduction letter saying hello and my name and emergency contacts and where to report repair requests and what to do if there’s more of an emergency type situation that we need to deal with not like a 911 situation and what to do with rent, where to mail it or electronic payment instructions.

Justin Sullivan · Answer

I would def make sure the tenants are aware of the potential transfer of ownership and know not to pay their current landlord on or before the 1st. This way if you do close on the 31st you can contact the tenants have them sign an addendum to their lease with your name on it and the updated payment options. At that point in time you can also have them pay you. I closed on a property at the end of the month and lost the first month rent because I wasn't proactive about this, on one of my rentals I purchased.Just be proactive and maybe have your agent add an addendum to your contract which states seller is responsible for ensuring the tenants don't pay him if the property closes as scheduled. They may kick back what is it doesn't. At which point he's still only afforded the days of ownership.You could also just have the tenants pay him and have that month rent added to the CD. So instead of you having to hustle around getting your money they just pay him as usually and if they pay $2k then you get an extra $2k at closing.Be sure to ask about the security deposit accounts and make sure you get that money on the CD as well. I am not an Attonrey and also in a different state. That is just my guess on what should be done.good luck and congrats on your first investment!!

Evan Polaski · Answer

@Ate Etim-Edet, a simple notice to the tenants is all that should be needed to make sure rents are paid to you and not old owner. Most leases, but consult with the existing ones, require written notice which is commonly submitted via certified letter, so you have a signature of receipt for your records. But a phone call, text message, email, and/or knock on the door is always a good step too, so you are not some faceless person that the tenants begin to resent.There is no change in lease required, since the leases are assigned to you from the prior owner at sale, and should be outlined in your sale contract. But if you prefer, you can always ask for one, where you cancel the old and sign a new, but may get some pushback from the renters. Typically, this is handled at renewal, with plenty of notice provided (I like at least 2 months, and if there is going to be a big rent increase I give 3 months, since I want to know if they are staying or going, so I can get contractors lined up to minimize downtime).Lastly, with Rentredi, as I far as I am away you cannot force a tenant to pay via a certain way. Most will be happy to accommodate, especially if it is free and easy for them, but I believe in most states (not an attorney) payment is payment, whether they pay you via rentredi, paypal, check, etc. But with this, you really can't FORCE a change while they are under lease. You can request, but they likely have the chance to say no.When you renew them to your form lease is when you can start making bigger policy impacts, like formalized rules, fee schedules for maintenance calls that are technically tenant responsibility, etc.

Ate Etim-Edet · Answer

Thanks, I'll be living in one unit, self managing through Rent Redi and also I have an aunt who has just retired from one of DC's top Property Management firms who was VP for the past 20 years. She will help consult and connect with vendors.

Ate Etim-Edet · Answer

Thanks so much, this is the exact information that I was looking for and will be using. I'll invite them to join rentredi and hopefully they will join

Jamie Banks · Answer

Congrats securing your first deal! I’m in NOVA and I’d love to connect sometime. Will you be using a property manager or self managing the quad?

Ate Etim-Edet · Answer

Thanks so much guys, I should add that I'm also a DC agent representing myself but this is my first personal property investment deal so wasn't sure but I'm going to be VERY Proactive about this.

Justin Moy · Answer

If you are hiring a PM they should have a template letter to notify the tenants of the new ownership. They should also already have leases you can use. The lease is typically 12 months so when a tenants lease expires you will have them sign a new lease that you / your property manager will write up. Make sure you get a credit for any prepaid rents at close and if any tenants do pay the previous management company it should not be difficult to get those back. I'd get back with them 10 days after close and request any rents that were paid to them by mistake and they should get that your way if they were a reputable company