How to have "The Talk" with inherited tenants

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I purchased a fixer duplex with tenants who pay $695/mo ea.  Market is $1300/mo. in that Portland neighborhood. Their rent hasn't been raised since they moved in in 2012, and the units are in varying states of disrepair.  

They're on month to month agreements.  

The rental agreement I drew up is also month to month, but it raises their rent to $1208 in 100 days.  I'm also offering them $700 if they choose to leave within 40 days, and $300 if they choose to leave within 70 days. Ideally, they would choose to leave sooner rather than later so I can fix the units and rent them at market.  But it's their choice.  

I have an appointment to sit down with the tenants (each separately) this weekend to go over the new 7 page lease and answer any questions they might have.  I realize there's no way to do this without being the bad guy, and I can't worry about them liking me.  AND, I'd like to do it as painlessly for everyone as possible.  

Have any of you had to have this discussion before, and if so, what worked/what didn't, and what did you learn from the process?  If you can recommend specific things I could say, or scripts even, to place the "blame" on the previous owner who decided to sell and/or the market, so it's not a "me vs tenant" interaction, I would really appreciate it.  

I bought the property with a partner, but I agreed to be the one to manage it.  We can play good cop bad cop if need be (I'm probably bad cop), but since I agreed to manage, I want to keep my agreement to him and leave him out of this if I can.  

[Neal Collins]

Dani Z. Congratulations on your new acquisition!Woodlawn is such a great little neighborhood and it's nice that you're not very far away.

What you're going through is the hardest part of the business in my experience. I agree with another poster who advised that in the future closing should occur when tenants move out. That's definitely the ideal, but not something the seller necessarily will willingly do. Therefore you do find yourself in these situations from time to time.

I like your empathetic approach to the situation but will caution you that no matter what, it's going to be you vs the tenant. It's very unlikely that you will be able to spin it as "us vs the previous landlord/market". Your reasoning is sound and your talking points are spot on, but at the end of the day you're still the one whose responsibility it is to increase the rent, file a no clause, fix up the property, etc. It wasn't just the landlord's fault that the property degraded, it was also the people living in each unit. This is the reason a lot of property owners hire property managers, and I applaud you for taking on the responsibility you agreed to.

I personally don't think you need to do a cash for keys approach if you're looking to hold onto the property and the tenants are on a month to month lease. If you need an expedited timeline then offer the money in exchange for keys, but if not, use the 90 days as a good time to plan and get things ready.

My approach would be to tell the tenants that it's your job to be the steward of the property, and as such, you have different standards than the previous owner. Your job is to ensure that the property is in good condition moving forward and that your tenants have a safe, clean, and quiet place they can call home. State the facts they already know--rent is well below market and has been static for five years. If you'd like to keep the tenants then go ahead and issue a 90 notice to increase rent, but I wouldn't go all the way to market rates. I'd also give them an update as a show of good faith- buy a new refrigerator, replace the carpet, update the cadet heaters, sometime so that they can feel like they are getting value in return. What's tricky here is that you still need them to know it is not okay for the apartments and common areas to be trashed.

Sometimes having all new tenants is a good thing. No lingering spillovers from the previous landlord's tactics and a hand-selected tenant base of your choosing. If there are tenants in there that you absolutely do not want in your building then you need to give them a no cause 90 day notice to vacate, no exceptions. Don't forgive rent in the meantime for leverage sake, but I do think it's nice to pay for the moving truck. Be firm and consistent but also courteous. It's your job to follow the letter of the law and be sure to document your communication. It's a rocky period but it'll pass. Tell them you'll prorate rent back to them if they end up moving before the 90 days. Never unconditionally give them back the security deposit ahead of time since you need to hold onto all the leverage you can get.

It's nice that you have compiled resources for them to contact but be sure that you're not handing them the keys to call a lawyer that will help them in a plight to become professional tenants. The last thing you want is a tenant with a wrecked apartment that is now a legal crusader for all of Portland's housing woes.

Best of luck and let us know how it turns out!