First time land lord with inherited tenants

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First time land lord with inherited tenants

Matthew Gill
Rental Property Investor · Westbrook, ME · Member since 2019 · 2 posts · 0 votes

Hi BP world!

I'm closing on my first duplex sometime in September. It belonged to my spouses aunt who passed away recently. The building was up for grabs and we decided we would purchase it as our first multi family property.Both units are three beds one bath on a large plot of land with a big fenced in backyard in a quiet residential area. The building will be coming with inherited tenants. They are nice enough people however they pay way less than the curent avaerge rental rate in my town. I live in Westbrook, Maine. The town sits just outside of Portland which is the largest city in Maine. The avergae rental rate for a three bed apartment is between $1400-$1800. They curently pay $950 with water and heat included. Id like some feedback on how to go about raising the rent and what I should make the tenants pay for.

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y

If the Tenants are under a lease agreement, you can't change the terms until that agreement expires.

If they are on a month-to-month agreement, you can raise the rent with proper notice. I believe your state requires 45 days notice but check state law to be sure.

My advice:

1. Always give notice in writing. Don't justify it or try to sell it to them. Be honest, polite, professional, and concise.

"Dear Tenant, please be aware we are increasing the rent rate on your apartment. The new rate will be $1,300 a month, starting October 1st. If you are unable to afford this increase, please provide written notice of your intent to vacate."

2. Do not increase the rent incrementally. Either the tenants can afford it or they can't. It's highly likely that they can't so you should make it easy on everyone by increasing rent to market rate, get the current renters out, and put someone in that can afford what it's worth.

3. Don't give them extra time to find another home because they'll only drag their feet, fight you, stop paying rent, or cause other problems. Give them the minimum time required by law and be done with it.

4. Be prepared to spend money on upgrades. When rents are low, you usually have lower-quality tenants. It may need new paint, flooring, and other repairs before you can get market rates.

5. Separate utilities from the rent. If you can't separate them, bump the rent up to cover the expense. I usually increase the utility charge 15 - 20% over the historic average because tenants tend to squander utilities when they don't personally pay the bills.

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    7y

    Matthew 

    You should probably work on getting them out, make updates and raise rent to market rates. Or if you don’t want to do that, try a $100 increase within the next sixty days if they are month to month. Also look at your states landlord tenant laws, I know your state has started to enact some crazy rules

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  • Nicole Heasley Beitenman
    Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Hi Matthew! I'm not sure what the standard practices are in your area, but my tenants pays for basically everything--water, electric, trash, gas, lawn care, and snow removal. Also, note I'm in Ohio, not ME, so I'm speaking with my knowledge of Ohio laws. 

    If they have a lease and you want them out immediately, your only option is to offer cash for keys. Otherwise, you legally have to honor the lease. 

    There's only 2 ways to increase your rent--gradually or immediately upon renewal. Have a conversation with your tenants and see what they're thinking. You never know--they may not be planning to renew anyways. If you like them, see if you can find a compromise where you increase them significantly but still slightly below market so they're still living at a more affordable rate than they'd find elsewhere. 

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    @Matthew Gill  Look at what units in the neighbourhood are renting for.  Rent can vary depending on location and condition.  Talk to the tenants and see if there are any problems or updates that need to be done-don't tell them that you will do them, just make a list.  Then go through that list and see if any will add value to the home and are 'quick and easy'.  Explain that the rents are well below market value and they will be raised over time.

    If you raise the rent $450 (from $950 to $1400), they are likely to  move, then you have an empty building and will possibly have to spend more money to get it rented.

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    7y

    If the Tenants are under a lease agreement, you can't change the terms until that agreement expires.

    If they are on a month-to-month agreement, you can raise the rent with proper notice. I believe your state requires 45 days notice but check state law to be sure.

    My advice:

    1. Always give notice in writing. Don't justify it or try to sell it to them. Be honest, polite, professional, and concise.

    "Dear Tenant, please be aware we are increasing the rent rate on your apartment. The new rate will be $1,300 a month, starting October 1st. If you are unable to afford this increase, please provide written notice of your intent to vacate."

    2. Do not increase the rent incrementally. Either the tenants can afford it or they can't. It's highly likely that they can't so you should make it easy on everyone by increasing rent to market rate, get the current renters out, and put someone in that can afford what it's worth.

    3. Don't give them extra time to find another home because they'll only drag their feet, fight you, stop paying rent, or cause other problems. Give them the minimum time required by law and be done with it.

    4. Be prepared to spend money on upgrades. When rents are low, you usually have lower-quality tenants. It may need new paint, flooring, and other repairs before you can get market rates.

    5. Separate utilities from the rent. If you can't separate them, bump the rent up to cover the expense. I usually increase the utility charge 15 - 20% over the historic average because tenants tend to squander utilities when they don't personally pay the bills.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    3Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    7y

    How much are you cash flowing? If it is good I wouldn't rock the boat. Do small modest rent increases.

    If they move it will likely cost you in fixing the place up and you will loose several months rent which is hard to makeup.

    If your not cash flowing much then you need to see if they can handle a bigger rent increase. 

    2Reply
  • Matthew Gill
    OP
    Rental Property Investor · Westbrook, ME · Member since 2019 · 2 posts · 0 votes
    7y

    @Kim Meredith Hampton

    Thank you for your feed back. Im not sure what type of lease they have as of yet. As soon as the purchase is finalized I'm going to go over it and revise it to meet my requirements. I'll be meeting with an attorney to help go over all the laws. I forgot to mention in my original post that they have addition family living with them. An older daughter and her boyfriend. If I sit with them an agree to let them stay should I have the additional family member sign a lease as well. I do know that the previous owner allowed them to pay on the 12th for what ever reason. Might just be wise to start fresh with new tenants.

    0Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    7y

    Start new if you can, they are already ingrained with the previous owner and allowing unauthorized occupants and paying when they want

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
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    0Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @Matthew Gill

    Go back and read Nathan’s post. Then, read it again. Assuming you’re buying this rental property to make money, and not subsidize somebody’s way of life, you’ll do what he said.

    If you’re afraid you’ll have a vacancy so you only want to raise the rent by a small amount, then don’t buy the place, you’re not ready.

    Yes, it is possible to be a great landlord, a marvelous human being, and still charge market rate rents. As a matter of fact, I submit if you do not get market rate rents it makes being a great landlord more difficult, because the budget gets squeezed and poor decisions are made.

    1Reply
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