Raising rent on elderly couple

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Raising rent on elderly couple

Alexander Zurn
Lender · PA · Member since 2016 · 214 posts · 140 votes

I am a few weeks away from becoming a first time home owner. 3 Unit in Rhode Island. The property contains a 2 unit building and a 1 unit standalone cottage. This will offer a unique opportunity to be a landlord/property manager in a separate building then my tenants. I am certain of the numbers, the zoning, the structure, etc. and have really done my homework (thanks to all of BP!). My question now concerns future tenants.

I was recently at the appraisal and I (unfortunately) was asked to stay on the street while the appraiser did his inspection. During this time one of the tenants in the unit with the highest rent (still below market) really tried scaring me out of buying by bringing up points that I have already factored in and thoughtfully considered. Needless to say, I played it off but still took note of everything he said and triple checked it. All is well! However, during this conversation I was lead to think that it may be wise to raise the rents on this unit first because in reality they may try to do this with future tenants I try to acquire (i.e. speak out against the property, etc.). The only and exact point of raising rent will be to get it up to market value so if the tenants I am speaking of can pay, great! But I have a feeling they cannot. The wife of the couple is very sickly. She has had a tough winter, I know because I have heard stories during inspection, etc. and I have seen the proof of 16 stitches on her head from falling due to high blood pressure. My question is this:

Say I close February 1st, give a 60 day notice of rent raise (more than required) to fair market value (a difference of $300-$400 in what they are paying now) and they decide to leave. What happens if the wife becomes ill during the moving process? Assume worst case scenario, am I legally liable for any illnesses incurred during the moving process? What if she becomes sick and bed ridden during the time they are supposed to move out? My worry of course is that I would that I am responsible because I would be "kicking them out" (Would I be though?) but this could be the non-landlord/business attitude of my speaking and something that I will have to get used to.

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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
9y

Alex, I'm not an attorney by any means, but I don't believe you would be liable for any tenant illnesses or health issues.

Also you should know that if the tenants are over 62, or you would have reason to think they might be, you actually must give at least 60 days notice of rent increase (RIGL 34-18-16.1 Rent increases – Notice requirements).

If it were me I guess I'd try to form a good relationship with them at first and try to understand whey they may have wanted to say bad things about the property or current (soon-to-be-former) owner. For example if they felt the owner ignored their maintenance requests, you may be able to start off on a better foot with them by assuring them you will take their requests seriously.

I'd also consider that you may not want a vacant unit in the middle of winter, so if it were me, I'd probably spend the first few weeks getting a sense for these tenants, their issues, etc. and determine if you think they're going to bad-mouth the property/you to others.

I guess as long as they seem like relatively reasonable people (i.e. not hostile), if you still want them to move I'd probably defer to giving them 90 days notice and basically tell them you're giving them more notice than you need to because you want to make sure they have enough time to move.

But also tell them based on how much you paid for the property you absolutely need to raise the rent - it's not a question of your being a nice/mean guy, it's a question of making the #s work so you can afford the mortgage payment.

I'd also consider searching out some community organizations and contact info for the Department of Elderly Affairs and anyone else who might assist older people in finding new living arrangements, and include that as a second page to the rent increase notice.

A lot of questions like this depend on the specifics of the people involved, whether you can build a rapport, understand and possibly address their concerns, whether you think they're acting in good faith, etc.

So it's hard to really give an exact answer but those are some thoughts. And obviously if you're seriously concerned about any potential liability contact an attorney :)

(I'm assuming you've already told the tenants that you'll be the new owner; if not, I'm fond of telling tenants I'm just the property manager and someone else is the owner, so "the owner" can be the bad guy and I can be just another guy trying to do a job for his boss.)

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  • Clayton PlankPro Member
    Investor · Jacksonville, FL · Member since 2012 · 122 posts · 46 votes
    9y

    @Alexander Zurn you are not kicking them out you are managing your new investment. The guy that tried scaring you more than likely was trying to do so as they know they pay below market rents and they do not want someone coming in and actively managing the units. As long as you stay within the legal statues and guide lines you will not have to worry. I see it all the time where people are perfectly healthy until that eviction summons shows up. Then they play a said story to a judge trying to stay or get the eviction thrown out. Make sure your ducks are in a row when the time comes and remember this is an investment.

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    9y
    Are they month to month tenants or are they on a lease? If they are on a lease, you are bound by that until it expires. If they are month to month then you just need to follow your local laws for raising their rent or having them vacate. I'm not sure how you would be liable if the tenant gets sicker.
    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Clayton Plank Yeah, it's interesting because I can hear my gut tell me it's an investment but the back of my mind wants to make sure all legal issues are in order. The last experience I want is a legal suit on my first go round. Thanks for the input

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Darren Budahn they are currently month to month which bodes well for a situation like this. Perhaps "the stress of moving" could lead to more illness, at least maybe that would work in a courtroom? Trying to consider all angles.

    0Reply
  • Gail K.
    Augusta, GA · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    What you need to focus on is what type of lease do these folks have?

    If a yearly lease the amount of rent in this lease remains the same until it would normally expire.

    If they have a month to month tenancy then you are legally able to increase the rent with the appropriate written notice.   If they chose to move rather than pay this increase, that is their decision (I'm assuming there is no rent control issue here).

    "Assume worst case scenario, am I legally liable for any illnesses incurred during the moving process?"

    Like what...the flu when they go looking for another rental property?   Of course not.

      "My worry of course is that I would that I am responsible because I would be "kicking them out" 

    But your posting says nothing about terminating their lease (IF they are on a month to month tenancy).  Doesn't sound like your goal is to "kick them out" but rather simply increase the rent to what you consider market value.

    Gail

    0Reply
  • Account Closed
    Investor · Buffalo, NY · Member since 2016 · 668 posts · 209 votes
    9y

    On one hand you might be doing them a favor by urging this couple to confront her declining health and consider an assisted living arrangement or possibly moving closer to a supporting family (maybe the kids?). On the other hand you might feel guilty for being a Scrooge just after the holidays, so probably raise the rent halfway to market this year and bring it up the rest of the way next year to ease some of the pain. Best of luck with your investment.

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    9y

    @Alexander Zurn

    If they are month to month I would give them advance notice that their rent is going up. I'm sure you don't want tenants paying $300 below market rent. 

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Darren Budahn sure don't. They were on year leases until November and the owner put all the tenants on Month to Month while selling. Thanks for your help

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    9y

    @Alexander Zurn

    Good luck on the purchase. I definitely prefer month to month leases but I know others disagree. 

    0Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    Alex, I'm not an attorney by any means, but I don't believe you would be liable for any tenant illnesses or health issues.

    Also you should know that if the tenants are over 62, or you would have reason to think they might be, you actually must give at least 60 days notice of rent increase (RIGL 34-18-16.1 Rent increases – Notice requirements).

    If it were me I guess I'd try to form a good relationship with them at first and try to understand whey they may have wanted to say bad things about the property or current (soon-to-be-former) owner. For example if they felt the owner ignored their maintenance requests, you may be able to start off on a better foot with them by assuring them you will take their requests seriously.

    I'd also consider that you may not want a vacant unit in the middle of winter, so if it were me, I'd probably spend the first few weeks getting a sense for these tenants, their issues, etc. and determine if you think they're going to bad-mouth the property/you to others.

    I guess as long as they seem like relatively reasonable people (i.e. not hostile), if you still want them to move I'd probably defer to giving them 90 days notice and basically tell them you're giving them more notice than you need to because you want to make sure they have enough time to move.

    But also tell them based on how much you paid for the property you absolutely need to raise the rent - it's not a question of your being a nice/mean guy, it's a question of making the #s work so you can afford the mortgage payment.

    I'd also consider searching out some community organizations and contact info for the Department of Elderly Affairs and anyone else who might assist older people in finding new living arrangements, and include that as a second page to the rent increase notice.

    A lot of questions like this depend on the specifics of the people involved, whether you can build a rapport, understand and possibly address their concerns, whether you think they're acting in good faith, etc.

    So it's hard to really give an exact answer but those are some thoughts. And obviously if you're seriously concerned about any potential liability contact an attorney :)

    (I'm assuming you've already told the tenants that you'll be the new owner; if not, I'm fond of telling tenants I'm just the property manager and someone else is the owner, so "the owner" can be the bad guy and I can be just another guy trying to do a job for his boss.)

    4Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Gail K. they are currently month to month. I figure by giving 60 days it is a good faith attempt to allow them to look for quite some time and if they come back saying they will pay it, great, we both win. As @Clayton Plank said, I want my ducks to be in a row come increasing rent notice time.

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Anthony Thompson great points to consider. I did not know that 60 day notice was required for tenants above 62. Surely then I will give 90 days. I want to do the right thing, help them as much as I can, but also stick true to the business end of it, as you said, making sure to manage the investment. Unfortunately, I have told them I would be the new owner... another lesson learned! But hey I'll keep them coming as I won't forget them!

    1Reply
  • Clayton PlankPro Member
    Investor · Jacksonville, FL · Member since 2012 · 122 posts · 46 votes
    9y

    @Alexander Zurn that is a good strategy. This will also benefit you if you find yourself in court as you can show the court you gave them extra time to make the adjustments and to look elsewhere for residence.

    0Reply
  • Anthony ThompsonPro Member
    Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Alexander Zurn Depending on what you said, it's possible you might be able to amend that later by saying you bought the property with your dad, so while you're "an owner" you're not the only owner and you actually have to go to your dad to get final approval for anything since he's the real "boss".

    You could spin a small yarn about how this is your first property but your dad owns several properties and you wish you could let them do X but your dad is really a hard-*** maybe because he's learned to be after owning other properties for so many years, etc.

    It's up to you. I can see (and respect) where some folks wouldn't be comfortable with that. On the other hand I have found it useful in many cases to be the property manager (or junior co-owner) rather than "the decision maker". The ability to blame someone else and say "Look, I totally understand where you're coming from, I'll ask my dad but I don't know if he's going to agree, I think it's a long shot" has come in handy for me several times over the years.

    Years ago some guru said, "Be friendly with your tenants, but do not be their friends" and I think it was good advice. Sometimes it's hard to find that line but you'll get the hang of it and once you do it'll become second nature.

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Anthony Thompson that's a good idea too. I'll have to see where it takes me. I can see that being a great sort of middle man in transitioning to being a full on landlord. Step by step

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y

    @Alexander Zurn I would make sure that both of your tenants receive rental increase letters at the same time. If you are raising one $300 and not raising the other one at all, it could appear as age discrimination. Make your rent rate decision based on the market and be uniform in your policy. In multifamily, treating one tenant different than another can open you to liability. 

    They only way I see the sickness coming into this is if the tenant refuses to pay more rent and refuses to leave. If you end up having to evict them, a sick older person will get more sympathy from the court. 

    As far as tenants bad-mouthing the property; I purchased a duplex and one tenant went on about all the problems and how it wasn't worth the rent they were paying. Ultimately it was just a tactic to keep me from raising rents. I raised rents and they stayed ten more years.

    0Reply
  • Robert Wodogaza
    Rental Property Investor · Providence, RI · Member since 2016 · 59 posts · 39 votes
    9y

    @Alexander Zurn, I agree with everything that @Anthony Thompson said.  Also I would add that reading the Rhode Island Residential Landlord and Tenant Act law is a HUGE MUST.  There are many things in there that will affect you legally if not followed to the letter of the law.  You can really get yourself set up for a law suit and a lot of expensive legal fees and fines.  In this case, If the elderly couple is over 62 you only need to give 60 days notice of a rent increase, not 90.

    I know it may sound harsh and uncaring, but you need to think and act like a business owner.  That is all this is, it's a business and that's it.  If you let emotion play a roll you will regret it over and over.  I learned the hard way many years ago, now I run my business with no emotion involved and can say that things run much smoother with a lot less headaches.  As the saying goes, "No Good Deed Goes Unpunished".   

    1Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Joe Splitrock I agree. I plan to give fair and equal treatment to both units in terms of rent raises. Also, I am a little worried about the possibility of them receiving to leave, leading to eviction and that exact scenario in court.. but I won't lost sleep on speculation. I just have to make sure everything I do is legally correct. Thanks for the insight

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Robert Wodogaza couldn't agree more. I am surprised that I didn't catch the over 62 in the RI Tenant Landlord Act Law. I recently read, I thought pretty thoroughly, but I plan to re-read again anyway. Now I'll just make it sooner rather than later.

    0Reply
  • Michael Totman
    Real Estate Agent · Berlin, MA · Member since 2013 · 130 posts · 95 votes
    9y

    Lots to consider here. Sounds like your plan of raising rents is to get them to move. Why? To make an extra $3k this year? This is your first rental, and it's January.  Why not move in and take some time to figure out the property, fix the things that go wrong your first week that the inspector didn't see, and keep collecting rent even if it is below market.  Maybe they'll be impressed enough not to move when you do raise rents. 

    Run the numbers, what is your profit the next twelve months if you leave them alone vs kick them out and spend $xx,xxx.xx on renovating the apartment, court costs if they do fight it, and have it sit empty for a number of months? Is the other unit paying market rent or are you kicking them out too?  So you want a potential 2 empty units at once? 

    If you spend time worrying about all your tenants health based on the impact to them of your business decisions you will die young of stress.  Follow the law and you'll be fine if that's what you choose. 

    Remember, 50% of something is better than 100% of nothing.

    2Reply
  • Deanna McCormick
    Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    Rather straight forward, 

    Give proper notice you will be increasing rent, do it for all the units.

    Keep them all on month to month.

    Don't worry if they have big mouths, the next tenants could have big mouths also, but you could mention that you would appreciate  it and that you would want them to be polite to any new people on the property, you are aware of what they mentioned during the tour you took, and if they have plans on moving you'd be happy to work with them as your impression is they aren't as satisfied as they could be living there.

    Wait till late spring, early summer if you plan on doing a non-renewal notice.. that gives them time for proper notice if they are going to decide to move and some time to adjust to you as new owner. Could just be stress of new owner change over and not knowing what your plans are. Be fair, give extra notice at least 60 to 90 days if you plan on non-renewal. Things may improve.

    Cost of living isn't cheep anywhere and the raise in rent is probably something they are all expecting so do what is fair and raise all of them the same time. 

    0Reply
  • Account Closed
    Member since 2016 · 8 posts · 2 votes
    9y

    @Alexander Zurn Can you please update this thread after you speak with the tenants on your decision and describe how it went? I am very interested to hear how it worked out for you. Good luck!

    0Reply
  • Rob Lehmann
    Investor · Newport, RI · Member since 2012 · 24 posts · 13 votes
    9y

    First off, hello Alexander! I'm based in Newport as well, and it's always good to meet fellow investors in our tiny state.

    Others have touched on several points that generally apply, and I agree with all of what has been said. In this case, and with your location (which I know well), you may want to take particular notice of the advice given by @Michael Totman and hang on to the units until it's an opputune time to do otherwise.

    I'm not sure exactly where your property is located, but if it is anywhere near the Naval War College then you shoudl make this change with respect to War College semester changeovers. Naval officers are by far my best tenants. Did you know that their superior officer will reprimand them if rent is late? Even if you aren't near the War College I think you should be more tactical about when you increase rent. If your gut feeling is correct and the rental increase will cause the tenants to move out then think about doing it when Salve, URI, Brown, etc. students are looking for housing, or maybe at the beginning of summer season (when housing is ALWAYS in high demand and people pay premiums for nice year-round rentals.

    What I am saying is that our market is particularly seasonal. I've found that the time of year I list my units for rent has a huge effect on market price and demand.

    1Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Michael Totman that is a great point. I think you're right, in that giving some time for the change to sink in will be best. I can fix up my spot and as you said do some of the repairs the inspector pointed out, which I'm excited to do. In all honesty, I am not raising rents to get these tenants out, it is as simple as they are well below market rents. As I mentioned, happy to have them stay with the increased rent I just don't know if they will. Thanks for the input, I really will consider this thoroughly.

    0Reply
  • Alexander Zurn
    OP
    Lender · PA · Member since 2016 · 214 posts · 140 votes
    9y

    @Deanna McCormick another good point and plays into @Michael Totman's in waiting a little to raise rent. Spring and early summer (as @Rob Lehmann) pointed out are great times to get a premium and the warm weather is much better conditions to move in if necessary. This is great stuff. I will review this forum this weekend and really research and think about the best way to do this. I'll also be sure to update here when I have gone through with it, in due time for you @Account Closed

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