How to go about Inheriting tenants

[Anthony Zotto]

Hello BP!

I am purchasing a house and it is going to be occupied by tenants that do not have a lease and are paying way below market rent. I was wondering if anyone had experienced this and what’s the best way to go about it?

Thanks!

[Jaron Walling]

@Anthony Zotto I hope you purchased a good deal because it's time to go to work and establish a new order. 

You bought tenants and all there baggage. Get as much information from the previous landlord as possible BEFORE meeting them. You could break the ice, introduce yourself (unless you go PM), do an inspection, and bring a lease agreement for them to read and hopefully sign.

You'll probably increase the rent. The tenants are not going to happy, they don't want the details, and they only want facts. Use the information you have and determine what they can afford. If you're $400 below market rate I'd give them chance to "catch up". Sometimes tenants never catch up to market rate, but at least there lagging behind. This is probably the reason why the previous landlord sold with tenants in place. They couldn't or choose not to get rent increases in order. It's about to be your small business. Treat it as such or the tenants will try to take advantage of you as well.

If you jump rent $400 per month they could just move out. They could put up a fight. Aim for a path that benefits the current tenants if it's worth it. Hopefully they realize working with you and paying higher rent is better than moving. Get your lease, notices, and documents ready incase they put up a fight and won't sign the lease. An eviction hurts everyone.