Inherited tenants with under market rents. Prop manager questions

[Rajheim Hunt]

I purchased a duplex in Ohio, and inherited the tenants.  One tenant is an 11 year tenant, and the other is a 5 year tenant.  Current rents are set at $600 and $625.  Market rent is about $700.  I have a property management company set up, and the tenants have been paying the new management company, but have not signed a new lease.  They are still under the original owners lease, which has long converted into month-month.

I explained to the property management company that I wanted to proceed with a rental increase to get closer to market rent ($25), and was told that they can not do anything without the tenants signing a new lease.  I know the tenants have been in contact personally with the management company, as one of them reported a leaking faucet.

Thoughts from experienced investors?  I don't want to make a big deal about $600/year, but feel like the property management company can be doing more.  If the tenants don't want to sign a new lease, and remain month to month, I don't see why the property management company cannot provide them with a notice of rental increase.  Depending on how long the current tenants stay, I am missing out on potentially $2400/year.

[Marcia Maynard]

How long have you owned the property? What has your interaction with the tenants been so far? When did you start working with the management company?

Our rental agreements are Month-to-Month and we prefer such.  In most jurisdictions a Long-Term Lease will convert to Month-to-Month if it's not renewed and this can work to your advantage. With a Month-to-Month rental agreement you can raise the rent at anytime with proper notice. Proper notice is typically 30 days.

Notify the tenants that the previous lease has expired and that you are not renewing the lease, but will continue to rent to them on a Month-to-Month basis. Check to see if the lease they signed with the previous owner converts to monthly if not renewed for a longer term. If not, then the property management company may be right about needing another lease signed before rent can be raised.

Send them a rent raise notice as soon as you legally can. If both units are the same square footage and about the same in other ways, I'd raise the rent to $650 on each unit. By not chasing top of market rent, you will be more likely to retain your current tenants and not face a move-out. Turnovers can be very costly.

Find a management company you can trust and get your tenants on a new rental agreement that meets your needs. As others have said, learn the landlord-tenant laws for the jurisdictions where you have rental properties. Successful landlords and management companies know the law better than the tenants do.

Equally important is the quality of your rental agreement and how well you monitor and enforce the terms. Don't agree to accept a rental agreement designed by someone else without reviewing it and understanding the ramifications for you. Negotiate for what you need and want.

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Here is what I found online about Ohio law:

NOTICE REQUIRED TO END A TENANCY OR RAISE THE RENT

If the tenant rents month-to-month, either the tenant or landlord can end the tenancy

by giving notice 30 days before the rent is due. If the tenant rents week-to-week,

either the tenant or landlord can end the tenancy by giving a seven day notice

before the rent is due. The landlord can increase the rent by following the same

notice procedures.

If the tenant is under a written lease for a term greater than one month, the lease ends

at the end date of the lease, unless the lease states the lease will continue. Rent cannot

be raised during the term of the lease.