Inherited tenants with junk cars and trash

[Chris Chartrand]

Hello BP, I am considering purchasing a property with two, two bedroom apartments and two mobile home pads. The property is in rough shape with tenants having trash and junk cars strewn about. When we looked at the apartments, they were in rough shape, dirty, and run down. The mobile homes are owned by the tenants and the lots are rented. My question is, can I introduce covenants to the property for trash, cars, etc. with inherited tenants. 

Also, fyi I have a 3/2 rental across the street from this property, the property in question is 8.9 acres, so room for growth. My goal is to turn this into a nice rental community. I just don't want to jump into this if I can't get the current tenants to clean up.  Any thoughts would be appreciated.

[Marcia Maynard]

If the tenants are on a month-to-month agreement, you can change the terms of the agreement relatively soon after purchase by following the landlord-tenant laws for your jurisdiction for serving proper notice.

If the tenants are on a long-term lease, you can wait it out and change the terms at the time of lease renewal or just not renew the lease. The latter would force a move and things could get worse before they get better.

However, I believe the best approach is giving it a shot at turning the property around with a management style that encourages tenants to willingly improve the looks of the property and keep it that way. You've obviously been living with this eyesore across the street for some time. If the tenants themselves are not the dangerous sort, just messy, I would give it a shot to work with the tenants in turning this around.

First, secure the property and try to negotiate a good deal from the current owner as you will be taking over their "problem". If you delay, another investor will see the opportunity and snatch it up!

Here's an approach that's served me well in the past when we purchased a tenanted 8-plex that was run down.

• Introduce yourself and let the tenants know you would like to continue to rent to them. [This is the number one fear tenants have when a property they live in is sold. Put them at ease.]
• Let them know you won't be raising rent at this time. [This is the number two fear.] Some new property owners jump to the rent raise at the first chance. I don't because I can garner a lot of good will and cooperation from tenants with just postponing a rent raise. That has greater value to me. As I improve the property, I'll be able to raise the rent soon enough if I need too, and the tenants will be more receptive to such.
• Introduce your management style by communicating openly and honestly with the tenants. Show them your rental agreement. Show them what you can do for them and what you expect in return.
• Get the tenants on your own rental agreement as soon as possible. Make it a month-to-month agreement so you can change terms in a timely manner or end tenancy sooner if necessary. Even if the tenants are currently on a long-term lease, they are free to change to your rental agreement sooner if they want to. Long-term leases can be terminated early if all parties agree to do so. Think about what it would take for your month-to-month agreement to look more attractive to them than their current agreement.
• Ask them about things around the place that are broken or not functioning. Let them know you will be attending to deferred maintenance. Create a list of items with their help and prioritize it. Safety items will be higher on the list.
• Let them know you will need their help in clearing the yard and also things inside that would impede your ability to do necessary repairs.
• Provide a dumpster or a trailer to haul away trash and debris. Don't refer to their possessions as junk unless they call it that as well. Instead just say what you need.  Such as, "We need you to move this [the item] off the property. Although your previous landlord allowed you to keep it here, it doesn't work for me. We need to have clear access around the buildings. You can either dispose of it or move it to a storage facility. What would you like to do?"
• Let them know your goal is to get the property back in shape and to comply with all city/county ordinances. Communicate what your end goal is for the look of the property. Then pose the question... "What do you think?"  Listen carefully to their answer. They will have the choice to get on board with you or start looking for another place to live. If they see it as a choice they can make, they will feel much better and are likely to be more cooperative.
• Avoid coming across as heavy handed and controlling. Instead negotiate a win-win.  Tenants need good landlords, just as landlords need good tenants.
• Share your dream with them about the rental community you want this to become. Share with them some specifics of what it will look like.  If they value what you value, they will want to become a part of that and will change their ways to conform.
• If it's important to them but they are physically or mentally incapable of cleaning up the place, then identify the barriers and guide them to some resources.
• If it's not important to them and they won't come on board with you, then it's time to talk about a move-out plan.

Hope this helps!