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Updated almost 3 years ago, 12/13/2021
Should I remove a good tenant for more cashflow?
Hello BiggerPockets, I am closing on my first rental property in a week. This property is a duplex that I will be house hacking. Both units are occupied at the moment with Long term tenants. Both have been living there for 15+ years. One tenant has taken very good care of their unit for all these years while the other one hasn't exactly. I am evicting the tenant that hasn't so I can live in that unit and fix it up. I am having trouble deciding if I should remove the other tenant as well here is why. Her current rent is 575 which is extremely low in my area and for the location of my property. When I first did a walkthrough of the property the "good tenant" told the sellers agent that the most she could afford on rent would be 750. Market rent in this area is 950-1100 for a unit like mine. I know this unit would need upgrades to get it to this level but I know I could do it for under 5k since she has taken care of this unit that well. The agent mentioned to me that the tenant treats her unit as if it was her own property she mows the lawn, get rib of her own snow and as I walked though the unit she keeps it impeccably clean and organized. The past landlords didn't do these things since they are out of state apparently. I think that's why she got such a discount on her rent. I would of course take care of all these things since its a duplex not a single family home. My big question is, is it worth it to remove her for market rents? I would ideally like market rents so that my out of pocket expenses isn't as aggressive without a roommate in my unit, but I also like that fact that I wouldnt have to worry about that unit as much. I would ideally like to offer her a year lease for rent in the 800-850 range but what if she can't afford it and I would have to go though an eviction. My numbers are already really tight unless I get a roommate which I do plan to. I would greatly appreciate your advice thank you in advance, here are my numbers.
Monthly Expenses- $1781 Income/ -431 that I will need pay out of my pocket
Unit 1-850
Property taxes- $246 Unit 2- 500/ I will rent out one bedroom in my unit
Insurance-120
water and sewage- 35 Purchase Price- 236,000
Garbage- 45 Downpayment and closing costs- 5,200
Vacancy- 50 Estimated rehab fro both units- 10,000
Repairs- 50
Capital expenditures- 50
Mortgage- 987
Sub Lien- $88 This is payment for a downpayment assistance program in my state. 10,000 borrowed at 1% interest.
Mortgage insurance- 110