Newbie landlord. Please help with the very first steps!

[Aleksey Vinogradov]

Hi everyone

I'm (hopefully) about to close on my first rental property and I'm really in stupor about what my first steps should be.. The situation is this

This is a 4-unit property (2 duplexes, 2BD 1BTH apts., rent control exempt) fully occupied. Current owners - a senior couple - live there and plan to move out in a few months. According to them, all the tenants are good and pay in time, one of them has been living there for 8 years, the others for around 3 years.

BUT

1. None of the tenants has any paperwork, actually the landlords just didn't bother with rental application nor did they with lease. No security deposit either.

2. Tenants pay ridiculously low rent. Something below $800 while the market for 2BD in this area (Bloomfield NJ) just starts at 1100.

The condition of the apartments is not terrible but definitely needs renovation once the units become vacant.

So, looks like as I take possession of the property I'll need to have the tenants fill out rental application, sign lease and provide a security deposit. Also it's the best time to rise the rent. I think this will be a great stress on the tenants and I'm afraid they will move out all at once.

The key word is not "move" but the word "at once".. It's OK if they leave one by one as I need to renovate the units anyway, but all at once.. you know what I mean..

How do I pursue my goals and not to scare tenants out at the very first moment? Any ideas?

Thanks in advance!

[Jon Holdman]

First, I would try to get an "estopple letter" signed by each tenant. It would outline the rent, the security deposit ($0), and the term of the lease (month to month, I assume.) And any additional terms such as who pays utilities, how much notice is required to leave or terminate the lease, etc. I'd spend a couple hundred to have an attorney in your area who specializes in landlord tenant law review your lease and brief you on laws and customs in your area.

Raising rent from $800 to $1100 is sure to cause vacancies. That's a big jump. You could try doing it one at a time, but they will all figure out what you're up to, so you may get move-outs before you plan. Hopefully your business plan is able to tolerate the vacancies.

I would, at the least, put the former owners on a formal lease at market rates rents, unless you've already negotiated something else. In any case, you want a formal lease with them.

Personally I like month to month. A long term lease binds a landlords hands more than a tenants hands.