Problems with Exisiting Tenants?

Question

Hi All,I have just find out that my offer is accepted for a multi family home. This triplex home is fully occupied with tenants. The leases are month to month and 2 of the tenants seems to be long term tenants (10 years!) I would like to know what type of potential problems I might get with the existing tenants and how I can avoid them? Thank you!Mary

Deanna McCormick · Answer

More than likely current owner doesn't want current tenants to know property is in transition until last possible moment. Do a Welcome letter to everyone the day you take over, include who they now make payment to, your contact emergency number, and let them know you look forward to meeting them.As far as leases, you don't want to renew or give everyone same date for renewal, stagger your renewal dates so you won't risk having 3 empty units. I'd give the longest tenant the last renewal because this unit is most likley the one that will need the biggest rehab if they decide to move, we have had tenants in same unit for over 16 years. If they resign let them know you'd be happy to repaint the livingroom or a bedroom, or clean the carpet as a incentive to resign lease. It only makes sense to keep property up and cost of doing this is small. Congrats on your new project. Your lucky your in BP it's a great resource for you.

Thomas S. · Answer

With M2M leases quality of inherited tenants is irrelevant. Once you take ownership simply end the lease on those that you do not want.With new tenants put them all on M2M as well. This places you in full control. Good tenants should have no issues with a M2M lease. A term lease does not guarantee anything from a tenant all it does is make it more difficult to get rid of bad tenants.

Chris T. · Answer

Hi Mary M. !congratulations! I would ask the seller to present you their previous leases and any kind of documentation they can provide you. Perhaps get permission to talk to the tenants? There is really no way to find out unless you can talk to them, but sometimes the landlord doesn't want the tenants to know they're selling. And even if you do talk to the tenants, they might not tell you everything.If the numbers work for you for this property, I would have backup plans to have the tenants leave if the units are not taken care of, or if you feel uncomfortable with them. If they're 10 year tenants, you might have an opportunity to increase rents as well!

Madeline Burke · Answer

I completely agree with @Kaycee Wegener, screening is 100% the most important thing you can do. I also like to call and verify their current employment. The best advice I've heard on the subject is to step back, when considering a tenant, and ask yourself if you would lend them $200,000+ in cash - if not then maybe you shouldn't lend them your property.

Kaycee Miller · Answer

Before having any tenants sign a new lease with you, make sure to complete your standard tenant screening and run background checks, credit reports, etc. on the tenants. Maybe the original owner didn't mind having a felony drug dealer live at the property but you might. Just make sure to follow federal and state laws about screening current and future tenants.

Mary M. · Answer

Thomas S.Thank you all for great advises.I really appreciate it.

Mary M. · Answer

Thank you Chris T. for the great tips. This is going to be my very first rental property and it is a relief to have great people like you to share their experience and knowledge!

Karen Young · Answer

Find out who has the security deposits (seller, property manager) and verify the amounts with the tenants. Then make sure the deposits get transferred at closing.

Colleen F. · Answer

Get the leases and payment history as well as any move in checklist. Make sure the tenants sign off on the deposit amount so you can make sure it is transferred to you on sale. There are times when tenants and former landlords don't agree on what was on deposit. That can cost you. I have started showing deposit amounts on the front page of every renewal lease as a reminder to the tenants. The biggest issue I think with long term tenants is habits that you may not want. You just have to be firm on the issues and with any rules fairly enforce. I give one warning and then impose the late fee or give the lease violation letter. Consistent across tenants. Keep the relationship a professional one from the start. You want to be friendly but not chummy. Also if there is inter-tenant conflict you can be impartial. @Madeline Burke I get the idea but there are a lot of people I would rent to that I would not loan money to! Tenancy is a more temporary relationship. Some of my renters are 20 somethings-its basically would you trust them to take care of your asset and can they meet the rent every month?

Chris T. · Answer

Don't forget to hire a good experienced home inspector to go through the house!