Buying Class C Duplex with One Hold-Over Tenant

[Hilary Hageman]

Hey guys,

My husband and I are considering buying an add-value duplex that looks like it needs about $20K worth of work.  It needs all new siding and new floors as well as possibly a new roof and some concrete work on the porch.  Has new interior paint and renovated kitchens and bathrooms.

One of the units is currently occupied.  How do you handle major repairs with live-in tenants?  

How do you go about introducing yourself as the new landlord to the tenants?  I'm almost certain we will be raising the rent: how does this work?  I'm pretty sure they have a month-to-month lease at the moment.

[Gino Barbaro]

@hilary Hageman

Hi Hilary,

On a small property, introduce yourself to the tenant and tell her what you are going to do to the property.  You can perform all the exterior work without bothering her.  As far as her unit, I would not touch it unless she decides to move out.  I would raise the rent after you upgrade the exterior, if she is below market rent.  You will probably get pushback, but that's okay.  You added value to the property and need to generate market rent to "pay for these improvemements".  In the larger properties, we send out a tenant takeover letter spelling out the new ownership and new rules.

If they are month to month, it will be easier to remove them if they give you problems. Tenants know exactly what market rents are, so if you are fair with them, chances are they will stay. And if they leave, that's the time to upgrade and do any work in their unit

Best

Gino