Can I evict tenants?

Question

Hey everyone.

I'm looking to buy a duplex in Knoxville, TN. I'm leaning toward house hacking it and would prefer to get an FHA loan for the lower up front down payment since it will be my primary residence.

Both units (3 bed 1.5 bath) are rented out for $800 in a market where rent is $1200-$1500. So I have a couple of questions:

1) Do I need to have cause for evicting the tenant out of one of the units (more than the cause that I want to live in it)?

2) With the tenants in the other unit, should I raise the rent to match market value? Or evict them as well and start new?

3) Am I even able to acquire an FHA loan if I'm unable to move in as soon as I purchase (thinking about the eviction timeline)?

Thanks!

Michael Dumler · Answer

@Nick Longstreet you can't just simply evict a tenant because you want to close on a property. The lease transfers with the sale of the property, therefore, the tenant is allowed to remain in the unit until their lease expires. If the tenant is month-to-month, most state laws require that the owner gives at leaset a 30-60 day notice to vacate. In your scenario, you would have to negotiate this with the seller and inlcude a stipualtion in your offer for one of the units to be delivered vacant. The same is true with your question regarding rent raises. If the tenant is on a fixed lease, then their rent cannot be raised all of a sudden. Last point, and to answer your final question, no, your lender will not issue the loan if both units are still occupied by closing. Hope this helps!

Nick Longstreet · Answer

@Michael Dumler That makes a lot of sense. That's kind of the route that I figured would be best. Just nice to get opinions from others who might have some more experience. Thank you everyone!

@Nathan G.

@Theresa Harris

@Scott M.

Michael Dumler · Answer

@Nick Longstreet Nice. Yes, I would let the lease expire for both units, turn them around, occupy one, and rent out the other at current market rents. That being said, I would still include a stipulation in your offer addressing that both units are to be delivered vacant by the time of closing. Hope this makes sense and helps.

Nick Longstreet · Answer

@Michael Dumler thanks! That makes a lot of sense. I got a response from the seller in terms of the least agreement and he said they are on a year to year least that ends at the end of this month (Feb). So its likely that by the time we close, they're leases will be up.

Would you say it'd be better at that point to just let both end and start new being that their rent is so low currently? Then rent it out to someone new for market value?

Scott M. · Answer

1) You need to know and follow local rules and regulations for eviction.  "Because I want you out" is not legal justification for eviction anywhere in the US that I am aware of if the tenant is on a term lease.  Month to month you can give proper notice and follow local laws.  that said you can always ask, you can always offer them cash to leave and if both parties (landlord/tenant) agree to end a lease agreement you can always do that.  in today's crazy COVID world evictions are not what they used to be so you really need to understand what the process is locally before you buy or you can ask the seller to have it empty on sale. Doesn't mean they can or will, but you can ask.  As you are getting a mortgage you have X days to move-in so you better be clear on this before you head down the mortgage fraud road

2) Raising rent is a two prong process.  First, is the unit in market condition?  If the tenants moved out today and you did nothing but clean, would you get market rent?  Or because it needs renovation would you get far less?  Are you 100% sure 800 isn't market rent for the condition?  If it needs work, are you willing to do it?  If so then you can have a conversation with the tenant, tell them you are going to raise rent to X and if they baulk at the condition you can offer to bring it up to market rates or they can leave.  Generally, for a rate raise this much, you are better to clear house and start over if you can

Theresa Harris · Answer

You evict people because they have broken the terms of the lease, not because you need to move in.  If you want to break their lease to move in, you are going to have to give them notice.  Depending on where you live and the rules, you may need to compensate them.

As Michael said, you have to honour the terms of their lease, so you'd need to see when the lease is up.  Then you can raise rents (again check your local laws if there are caps on how much you can increase them).

Can I evict tenants?

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