New Landlord Seeking Your Advice

[Matt Heaton]

I have just partnered on a 6Plex and would love to get advice from anyone willing to give. We are local to the property and the last landlord has been managing it himself and says the tenants are very low maintenance. We would like to try this and will be prepared to bring in a property manager if needed.

First off I can’t find the documents specific to each state anywhere on BP. Anyone know where I can buy a lease agreement specific to the state of Utah?

How would you approach tenants with a rent increase right off the bat? They haven’t had an increase in 15yrs!!! They’re way below market average.

What should I watch out for and be prepared for? Any and all advice is appreciated! Thank you!!

[Jennifer T.]

For me, it would depend on how "way below market" they are and possibly the class of rental this is.  For the kind of rent increases it would require to bring it closer to market, would that even be within the realm of what you could reasonably expect these tenants to be able to pay?  I'd bet there is also a lot of deferred maintenance going on that would need to be remedied to get the units to market rent.  So take that into consideration also.

This is my recent example.  I closed on two duplexes a couple weeks ago.  Very distressed properties, it's been years since anything was done to these.  One unit was vacant, the other three tenants were paying $500/month (all month-to-month).  In a nutshell, my educated guess was these tenants are living in barely habitable units because that's probably the extent they can afford.  Not so much because it's a good bargain.  The market rent for those units in their present condition is $750/month.  Fixed up, they'll command $1100-$1200/month.  For me, it was no question I just needed to rip the band-aid off.  After closing, I gave everyone Notices to Vacate at the end of this month.  Which was a bit more than 5 weeks (at least 30 days is required where I live).

I've been sympathetic.  Because I am (or at least I was).  I've nicely explained that, they know the condition this property is in also, and I just can't do the rehab I need to do with people living there.  Unfortunately, it usually doesn't matter.  People are upset whenever their apple cart is tipped over, no matter how much logical sense it makes, and being mad is a typical response.  So be prepared for that and get used to it.  It will be good practice for when you have to nag someone about paying their rent and post a Pay or Quit notice on their door.  Most tenants, when properly screened, are great.  But never forget this is a business and there are contractual obligations on both sides.  Be firm.  Be fair.  And be ready to follow the letter of the law when you need to.

Like those tenants.  I closed on 6/24.  I included intro letters along with my Notices to Vacate.  The intro letters included that their security deposits had been turned over to me, with a reminder they could not be used for last month's rent.  And how/who to pay July's rent. Here are some ideas of how I even tried to make it as easy as I could.  I included wording that, if July's rent was paid in full, I'd return the unused pro-rated portion if they moved out sooner than July 31st.  That I was familiar with the existing damage, I'd return their security deposit in full and promptly, as long as the unit was broom-swept and didn't leave trash/property behind.  But no.  They chose the path that put less money in their pocket.  Two of them had their rent due on July 1st.  When neither tenant paid their rent on the 1st, I posted Pay or Quits also.  They chose neither of those options either.  Now we are all headed to eviction court on July 29th for non-payment of rent.  I suspect we would have all ended up there anyway, so some of the irony is the non-payment of rent just gave me a faster way to get there and ensure they're out around the end of the month.  But it's a sad way to do it and never my first choice.