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Updated over 10 years ago on . Most recent reply

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Matt Bowers
  • Investor
  • Seattle, WA
3
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12
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What should I do with inherited tenants that had verbal leases with prior owner?

Matt Bowers
  • Investor
  • Seattle, WA
Posted

(We're in Seattle.)

This is my first post on BP!

I'm closing on a triplex on July 31st that currently has tenants. The tenants are all month-to-month but two units only have verbal leases. Repeat: NO written lease. We want to raise the rent by about 15% for each. I was going to raise the rent 9% after 30 days and up to 15% after 60 days. The part I'm confused about is if I need to sign a lease on day one, or if the current verbal agreement is sufficient. We did sign estoppel agreements with all three tenants. We do not have previous applications from the tenants.

How would you handle this? Thanks a lot!

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Bill S.
  • Rental Property Investor
  • Denver, CO
2,901
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Bill S.
  • Rental Property Investor
  • Denver, CO
ModeratorReplied

If you raise the rents 15% you will be getting new tenants whether you want them or not. Your current tenants likely can't afford that kind of increase so they will either move or you will have to evict.

The standard approach would be to meet them the day you close, put a lease or month to month agreement in front of them and have them sign it (after they have time to review it of course). If they won't sign it, you give them written notice to move. If they don't move, you evict.

Your lease or MTM agreement would have the rent increases built into it that you plan.

This doesn't allow you to screen the tenants but it does give you some control that the current verbal agreement does not.

You can require that they complete the background check if they stay as well as executing a new lease. Remember this, you are completely changing the management style of this building so it's not likely that they will mesh well with your new approach. Be aware.

I bought 4 units on a Friday and by Monday I had 3 vacancies. I was surprised to say the least. Apparently, they could see the handwriting on the wall by the way we processed the purchase.

  • Bill S.
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