Inherting Smoking Tenants and No Security Deposit

[Cody DeLong]

Long story short I’m purchasing an 11 unit that currently are all month to month with no security deposits. The current landlord is giving me a great price (cash flows $1400 a month after all expenses, prop mgmt,and %). It needs some outside upkeep but that’s beside he point. I went for inspections today and everything was great BUT, 7 of the 11 apartments were smoked in. This was news to me. Current owner said that he just didn’t care/ thought they’d smoke regardless so he didn’t enforce it. Also a few apartments have animals. I will say the animals actually were all very good and the apartments clean of crap. 

What would you do in this situation? I plan on raising rent to a little below market as it’s way below. I do not however want to evict as I need the cash flow to start out and not blow my reserve while I clean, refloor, and paint units. Should I essentially just keep as is and as new people come in explain no smoking, add a pet deposit that’s non refundable, and year lease?

If this was any other deal I’d run but this is a property that if turned around with some general upkeep will grow into a cash cow. 

[Account Closed]

Hey Cody, this can be a tough one, I'd personally meet with all of the tenants and find out where they're at, how long they're planning on staying, etc... If you can work with them on a rental price and tie them into a year long lease that stipulates no smoking indoors then you'll be able to enforce it and keep the cash flow. Often tenants don't want to go through the trouble of moving (especially when they look for a place and realize what a good deal they're getting), so you can come to an agreement on such topics as smoking and pet fees. I wouldn't consider eviction unless a tenant was being extremely uncooperative. If rents are already way below market, it shouldn't be hard to give them their 30 day notice and place a new non-smoking tenant in there for market rate.