Taking over a duplex with current tenants set in a lease

[Mandi DeGroot]

I am currently looking for my first multi-family property to house hack.  A lot of the places I have been looking at have tenants in them.  One for example had a tenant lease going through 2022.  When I buy a property, do I have to honor the current lease, the lease price (a lot have had long term tenants to the rent is not comparable to other rentals in the area and needs to be raised) and any other information/insight anyone can offer in this area would be appreciated.  Thank you.  

Mandi 

[Thomas S.]

The answers are state specific. Before you invest you need to study/learn all your state landlord tenant codes. It is your responsibility to know the codes before you interact with any tenants.

Long term leases are terrible for landlords, M2M is the most ideal to allow you to better control your business. When completing your DD get copies of the tenants leases, you must honour them however unless there is language preventing you from doing your annual rent increase it may not be too bad.

Always keep in mind that you make money when you buy, this means that low rents and long leases means that you lower your offer price accordingly. The seller will end up losing money for making the mistake of having long leases and rents under market. Being tied to a long crippling lease with low rents simply means the seller is going to pay for his mistakes not the buyer.

When selling a rental always make sure your tenants are all on M2M leases if you want top dollar. Experienced investors want to be able to control inherited tenants and raise rents asap..