Buying Occupied Apt. (w/ poorly trained tenants) & Raising Rent

[Jonathan Sowinski]

The property in question is 8 units and has been poorly managed; they don’t collect the rents on time and sometimes not at all (so I have been told by seller) and have a lot of deferred maintenance and offer below market rents.

I have requested the payment history from in order to ID the problem tenants, but like everything else the seller is very slow to respond. Not to judge anyone’s character but I have met half of the tenants and seen all of their living conditions and have a pretty good idea of who may be the problem tenants.

Our plan is to close on the property (few weeks away!!!)and send out a nice letter introducing ourselves and politely let them know that there is a new sheriff in town…pay the rent or off you’re sent…we are also going to include our rental applications/tenant info forms and a tenant survey inquiring about things like preferred method of payments, things they like about the building, and if they would be willing to pay more for larger ticket improvements (new windows, doors, carpet)...

Also, immediately after closing we are going to repair a few small ticket items that are needed in order to obtain an updated Certificate of Occupancy from the City (CO detectors, broken window, fire seal a few voids in ceilings…) We hope that this will show our desire to improve the building and that we are professional.

After the dust settles and the 1st payment period passes (hopefully everyone pays on time that first month and we won't need to issue notices to vacate or evictions) we are going to send our leases with a notice of increase of rent (we will be giving them 60 day notices and they are all month to month). This is where we are expecting some mud to hit the fan bc we are jacking the rent up $75-$100 to $600 & $625 (this is still on the lower end of fair market for these apts. in this area). We are anticipating some sort of exodus at this point and budgeting for a few evictions, but are hopeful that a few will stay and the others won’t give us much trouble.

Does anyone see any major flaws with the plan, suggestions and/or experience in similar situations?