Removing old tenants before a buy+rehab

[Ben Hollingsworth]

We're about to start buying small multi-family rentals, preferably those that need some rehab to boost rents.  If the building we buy is already full, how do we get rid of the old renters so that we can rehab the units and then refinance to get our money back?  For example, assume the old renters are paying $300/mo, and we expect to get $600/mo after rehab.

Do we have to officially evict everyone?  Do we have to wait til their current leases expire & then not renew?  Can we raise the rents immediately after purchase, regardless of their old leases, and then wait til they move on their own?  What do the rest of you do?

[Jeff Copeland]

In most states, leases survive the sale and you would need to honor them until the term expires. 

You cannot evict someone unless they violate the terms of their lease (such as not paying their rent). 

And you cannot raise rents while a current lease is in effect at the lower rate. 

There are some creative solutions, such as what's commonly referred to as "cash for keys" - you negotiate an early lease termination with the tenant, in exchange for some financial consideration/moving money. 

This can work out great and be a win-win if done with some tact. Just be sure to document the agreement in a written document such as a "mutual agreement to terminate lease" (get an attorney to draft it) confirming the date they are vacating/surrendering the unit, and outlining what is to be done with the security deposit and any personal property left behind.