Purchasing My First Multi Unit - inheriting tenants question

[Eric Meyer]

I haven't yet closed on my first rental which is a 2 unit, but I'm trying to get ahead of the game here. I've read a dozen books, podcasts, researched, and looked at many properties. But now i'm going to be a landlord, theres no more just reading about, I have to do it. I'm inheriting tenants in each unit. One is the mother of the current owner and the other is a family friend. There is no lease, no security deposit, and they are below market rent, which they know. I will be closing just before Christmas. I've briefly talked to each tenant about what is going to happen, a lease will need to be signed and rent is going up. Let me share what my thoughts were and then please offer your opinions.

Front House: 3bd - 2ba family of 5 living there for 1 year (friends of the current owner). current rent is $750 with market being $850-900. They voiced that they plan to buy a house possibly in April. So my plan was to sit down with them after closing and discuss a plan: get them to sign a short lease until April, state that rent will be increased to $850, request a security deposit, but in return ask them if there is anything that they need done around the house, IE: small repairs and paint to make them feel like they are getting something in return. The two times that I've been to the house, they have been polite  and the house was clean and orderly.

Back House: 2bd - 1ba,  lady living there has been there 15 years (mother of current owner). current rent $550 and market being $700-750. I planed sit with her also and discuss a plan:  get her to sign a 1 year lease, raise rent to $650 and possibly raise second second year. request a security deposit, but allso in return ask if she wants any small repairs. She has already asked if I could paint the inside something different then the same biege its been forever. She is also very polite and house is extremely clean and cared for. 

I know this will probably be a burden right around christmas, but its buisness. Both tenants thought they had to move before closing but I assured them that I would like them to staty as long as we can come to an agreement. What are everybody's thoughts. Am I being to harsh, good plan, or what do you recommend?????? Thanks in advance.

[Brian Garlington]

@Eric Meyer

Eric you need to get an estoppel. Right now it sounds like they are month to month which is good but once you get the estoppel you will have something in writing. 

I’m going through this right now. Just closed on an out of state duplex in Cleveland and the day after closing I had my PM go over to the property to have the tenant fill out the estoppel. 

Surprise Surprise the tenant claims the rent is $600/mo and not $650 that it actually is. Tenant says “Oh by the way I won’t  have all the rent tommorow .... I’ll only have $350 but the previous owner said that will be OK. Last but not least she acknowledged in writing that she is on a month to month lease.

Suffice to say this doesn’t impress me as the new owner and she’ll be getting a three day notice posted on her door on Saturday if she doesn’t have the entire $650 by end of day tommorow.

I say all this because you have verbal info from your (about to be) tenants but you want something written so they can’t come back to you later and claim something different. You also want to have in writing any “side deals” the tenants claim they have. Also see if you can have the seller fill out an estoppel and compare the info that each provides to see if they are the same.