What would you do if this was your tenant?

Question

Hi Everyone,

There's a property I'm considering, a duplex. Currently one side is rented out to a long term renter (he's been there 10 years). He pays under market value and in fact negotiated a cheaper rent with the landlord (has a family, etc).

While amiable he's not the cleanest person, garage full of stuff, extra cars, etc. No idea what the condition is inside his unit, probably not great. I do feel rent needs to be increased, so A, how do you go about that subject, and B, when he does move out (if there's no record of previous move in condition) legally can you still keep the security deposit? What would you do? Thanks in advance. I have no idea if I'm going ot make a move on this property but I will have to deal with this situation if I do :)

George P. · Answer

U get it at a discount if the current tenant is messy. I love those deals. .

James Wise · Answer

Long term tenant. 10+ years...Only paying $100 under market? Keep him. Let him stay. With the rehab & then vacancies it'll take forever to recoup that $1,200 / yr.

Andy Luick · Answer

First off, go take a look at the INSIDES before you make an offer. If the tenant is a pig outside the home...he's a bigger pig inside. Is the other side vacant? If so, it may be vacant BECAUSE of the tenant. I would visit with the tenant and let him know that you are considering a purchase. There is a value to a long term renter...but here it might be further deferred repairs/remodeling of the space. For myself, if I have a pre-existing tenant who is a pig, I either won't buy the unit and avoid the headache entirely....or, meet with them to see if I can get them turned around or provide notice to vacate. I can tell you horror stories on single family units where we worked with tenants to clean up their acts...but pigs mostly stayed pigs. We avoid them.....we mostly do shared housing now and we usually do a monthly room "peek" to make sure the renters are reasonably clean. Happy Investing!

Duncan Taylor · Answer

After 10 years even if there was a move in inspection you are going to be VERY hard pressed to prove something is not normal wear and tear unless it is completely over the top. Something like holes in walls and doors would come to mind. But, the carpets - toast, if there are hardwood floors they are going to need refinishing, vinyl - toast and guarantee after 10 years, it's ugly too. On the rent front, if he has a lease you can't increase the rent until the next renewal. I would prepare him in advance. I would send him a letter introducing myself as the new owner. I'd let him know you wanted to make sure he had as much notice as possible and that you are going above and beyond what is required but the current rent is below market and will have to be raised to market rates at the next renewal. If his renewal is in less than 6 months, I personally would look at a staggered series of increases if the needed increase is large. But, that is just me, there is nothing requiring that - other than my conscience and faith.

Matthew Paul · Answer

Maybe you should see inside before you make an offer . How much below market rent is he ? If he pays and is a long term tenant , a bit less is worth it

Matthew Paul · Answer

Let him stay , go over and help him clean up the outside junk . Dont worry about the inside , its been that way for 10 years, he stays another 10 years and you do nothing to his place , how much do you have in the bank ? Rehab now and spend $ you havent received , let him stay and pay and when you rehab that unit you have gotten rent for XXXX years to cover the cost

Graham Mink · Answer

The guy sounds like he might be a problem to me. I wouldn't buy the property with him living there, I like to pick my own tenants anyway. I would put an offer with a contingency that the property is vacant before closing. Good luck!

Bobby Beard · Answer

How long is it going to take to get back 10k with 200.00 a month... It's a no brainer!

Esther Thomas · Answer

So the guy is paying $1,300 a month. His unit (assuming it's not trashed) would rent for $1,400 - $1,500 a month. He was paying $1,400 and negotiated to $1,300. I might try to see if I can take look at the inside this weekend.

Yuliany W. · Answer

Hi Esther, I have similar experience. The difference is that I already purchase the property and we are in the process of evicting the tenant. In my case, the unit is also not well taken care of (to put it nicely). We felt that that tenant deters other people from renting the other units. If he contains his junk out of sight I would probably keep him. But his mess is all over the place and it's a 7 unit complex so, I really want this tenant out. How much lower is the current tenant paying compared to the market rent? if it's not much of a difference, it might not worth the cost of rehabbing his unit. Back to our messy tenant, so we finally sent him a 30 day notice when his lease is up, but guess what? He refuse to move. So, we start the eviction process. Fortunately, in AZ this process is somewhat speedy. I will be able to have him out in about 20 days. Not sure how this process is in CA, but you definitely need to evaluate all your options before buying the property.