Inherited tenant troubles! Need some wise advice please!

[Diego Ortega]

Hi guys,

A little background about ourselves. My girlfriend and I have purchased our first house hack in Oak Park, MI and looking to get that passive income going as fast as we can. I've also flipped a home with my family and working on our second flip. So fixing issues as they come up and getting places ready to rent seems like a walk in the park on paper. What is completely new to us is dealing with tenants. We know it all starts with screening, but sadly we inherited a tenant. We're in need of some advice, so here we go:

The Tenant's lease ends October 1st. She has 4 kids and a husband which she may be divorcing (i think she is lying because he wasn't on the lease before, but we enforced he be put on the new lease). She also got a dog while we were in the process of purchasing the duplex. On her current lease it says she needed written permission and it would be an extra $50 a month. The rent is at $1000. So it went to $1050. Now, she was surprised by the fee, but we showed it was in her lease and she paid it last month. We also knew we had to redo the plumbing, which we did as soon as we took possession to let her know we want to make sure she is taken care of. We have also fixed any issues the previous landlord never did as they came up. Again, we don't want to be slum lords, we want our tenants to feel at home and happy.

Very early on, we noticed she was testing the waters to see what she could get away with and also, I don't think she likes us holding her accountable to the rules and being around her age or younger. So when it came time for the lease renewal, we got an attorney to make us a strong lease according to michigan's state laws and handed her the lease, the price increase to $1100 plus $50 for the pet if she wants to keep it. We also stated, not on the lease, that a list of a few more things we wanted to look into doing for her, like A/C, a dishwasher, etc. In order to make her happy and keep her. 

She declined, which isn't surprising, stating that she didn't like the price increase. It was discussed beforehand and she said it was fine as long as we looked into making the improvements i listed above. We did place $150 fee for late rent past the 5th to ensure she pays on time. She had a big problem with that I guess. but we want to make sure she pays. 

The real issue is she stated that she will not pay the last months rent and for us to use her deposit of $1000. We know she has a water bill of almost $1000 and she also owes us the $50 pet fee. We intend to redo her unit a bit when she leaves, so not as concerned with cleaning fees or any of that. My gut feeling isn't surprised by any of this at all, saw it coming. 

This being our first rental, we are unsure of wether to let her leave and hand the keys back by the end of the month to avoid the time, money, resources, stress and take the loss or to go after her. Should we start the pay or quit/eviction process ASAP to protect ourselves further and hunt her for all money owed? What would you do? We'd like to fix up the unit and increase the rent and actually screen/find a good tenant as best we can.