Inherited tenant is underpaying for the market, how to deal?

Question

So I will try to keep this short.

I am buying a duplex, planning to live in one end and rent out the other. The tenants that are currently in the other unit have been there for 10+ years, have taken great care of the place, and generally seem like amicable people.

However, they are underpaying in the market by quite a bit. They are currently paying $550 a month. From what I have gathered the old landlord never changed their rent since they moved in a decade ago. I've talked to a couple of different landlords in the area, my real estate agent, and online calculators and all think that unit could pull in 700-720 a month, especially once I fence in the backyard.

These people are on a month to month lease and in my state of Idaho I am allowed to increase rent as long as I give them a 15 days notice.

Here is my problem/question, I would like to keep these rentors but would like to get the rent closer to market rates. Is that even possible considering the jump? how much could I increase the rent without insulting them?

Or If you were in my shoes would you rather keep the tenants at a lower rate due to knowledge that they take care of the place or would you rather roll the dice on new tenants?

One other thing to point out is due to state laws the earliest I could raise the rent would be September - not the best time to be looking for new renters in my town.

Deanna McCormick · Answer

If they vacate due to rent increase you will have costs related to painting and needed updates, and down time for advertising, so pick your battles..

I would increase their rent to 675.00 and keep them on month to month. When you have more time, I'd give the idea of updating unit and give them the option to stay thru the updates, with rent increase or give them at least 60 day notice .

As far as rent increase I would give them the notice and let them know effective Aug 1st the rent will be 675.00 that gives them time to adjust it's only the difference of 125.00 and you'll not miss it.. in the long run for the first month adjustment period.

Don Spafford · Answer

Thanks @Deanna McCormick that helped clarify a couple things I needed as well.

Deanna McCormick · Answer

So yes  this is Idaho landlord tenant laws on rent increases...

so yes if you took possession July 21,, you could give them notice right away of rent increase that would take effect September 1st.. (not the 6th..) you just have to meet the prior to the first of the month deadline so at least 15 days prior to Sept 1st give them the notice..

NOTE:: has to be given in person by hand or certified Mail... no texts or emails... and no regular mail....

CHANGING THE LEASE A lease, like a contract, may not be changed without the consent of both parties. However, when the lease term ends, the landlord may change the terms of the agreement. NOTICE In a month-to-month tenancy, the landlord may change the agreement by notifying the tenant in writing at least 15 days before the month’s end. The change then becomes effective if the tenant continues to occupy the property after the last day of the month. RENT INCREASES Landlords may increase a tenant’s rent only after proper notice. If a lease specifies a certain amount of rent for a set time period, such as $900 per month for one year, the 20 landlord may not increase the rent during that time period unless the tenant agrees. In a month-to-month tenancy, the landlord must provide the tenant with written notice at least 15 days before the end of the tenancy, and fifteen 15 days before the increase becomes effective. Idaho law requires that the written notice be served upon the tenant. While the law does not mandate formal legal service, it does require ensuring that the tenant actually receives the notice. Therefore, landlords should hand the notice to the tenant personally or send it certified mail.

Vinod Dasani · Answer

@Travis Dawson - I agree with @Deanna McCormick as well.  I would increase their rent but still keep it lower than market.  A good tenant who has been there for so long and has kept the place well is a cash cow and no hassle which I would hate to lose if I were in your shoes.

Travis Dawson · Answer

@Deanna McCormick I close on the Duplex July 21, meaning I couldn't legal'y increase the rent until September 6th and it wouldn't take effect until August 1st. At least that is how I see it.I appreciate the advise and was kind of leaning towards that direction before I posted. I will do as you suggested and hope it works out for all involved.

Deanna McCormick · Answer

Oh and I don't understand when you say you can give 15 day notice for rent increase,, and then say it wouldn't take effect till September,, so something is mixed up in that thinking..or your not familiar with notice period requirements.. If they pay rent on the 1st of June, then notice anytime between the 1st and the 14th would mean rent would increase the next month  for July 1st,, if you give notice June 15th (today) but before the 30th ,, then rent would wait to increase Aug 1st.. ...

if you only have to give 15 day notice...

Inherited tenant is underpaying for the market, how to deal?

Most Popular Reply