Tenants that Smoke in Non-Smoking Units

[Noah Droste]

We purchased a 12-unit apartment complex in a town with around 4,000 people. This is the cheapest rent in town and the existing tenants were paying between 450-500. We've raised rents 10-12% and are rehabing units that now rent for 650. Our budget for this year is running low and we only would like to turn 1 or 2 more units. After doing our furnace filter changes we're noticing that several tenants are smoking inside. We self manage and I was l looking for advice on handling this. 

What is a good way to handle this? Should we send written warnings? Perhaps a phone-call would be best? We could also send 30-days, but we really don't want to turn that many units this year. 

If they agree to stop smoking the first time, but then we find they are still smoking should we proceed with a 30-day?  Looking for guidance on this issue and wanted to see how others handle it. 

Side note: this is our first purchase and we got in for 375k in a great little town that's commutable to two major cities in Michigan. Its going really well so far and I think we'll have most of the rents 1.25-1.5x within the next year or so. 

[Noah Droste]

Quote from @Adam Martin:

At this point the damage is done and I doubt it will get much worse.  I’d sent out a notice to everyone in the building reminding them that the units are non smoking and you will enforce it.  I doubt people will stop especially in the winter.  For tenants smoking I’d raise rents slightly above market on your next round of increases.  Some will leave and you can turn when you are ready and you will be compensated more for the others.  After you have your reserves non renew the rest.

Another route you could take since the damage has already been done is to just allow smoking.  Very few places do and you could probably charge a premium and reduce turnover plus when someone leaves it’s not like you have to completely renovate it if you get another smoker.  My only concern is fire risk but I’m curious if anyone else has gone this route.  

 I like the idea with allowing smoking and charging a premium. My primary concern would be the neighbors. We would almost have to make one of the 6-unit buildings a smoking building. Thanks for your input!