Inheriting Tenants with 1 YR Lease and Well Below Market Rent

[Aaron Rowzee]

Good morning, BP.

I've got a bit of a sticky question here. An accidental landlord family has contacted me with an offer to sell me their home. They had to move for jobs a year ago and have a tenant leasing their home with 1 yr left on the 2 yr rental agreement. It is my understanding the tenants are good people, pay on time, and are not violating any lease terms, however, they are paying $300-400 below market rent. And honestly, the numbers aren't interesting without recouping that monthly income.

What, if any, are my options to either up the rent on the current good tenants, or have them move and get a new family in there at current market rates? Would it violate any tenant rights or state laws to simply offer the tenant a renewal contract as the new owner or a notice to vacate knowing it legally has no claws and teeth? I'm by no means trying to be shady, a jerk, or unlawful, but really curious how I could make this deal work. Its a beautiful property in a nice area and the tenants themselves are wanting to sign another 2 yr lease. 

[James R.]

Rather than upset a good tenant and possibly break the law, why not deduct the $3600-$4800 in lost rent from the purchase price? Work with the seller and show him the numbers to justify the deduction. 

If you do purchase the property then you'll probably want to give the tenants a decent advanced notice of the intended rent increase so they aren't sticker shocked at renewal. If you want to keep them then you'll probably also need to justify the increase to them.