BRRRR-ing with existing tenants

[Anthony Paul Guglielmi]

I just bought a duplex. The unfinished basement is huge, big enough for 2 more units. Right now the current tenants have access to it for “storage”. They are currently on a month to month lease.

I would love to get started converting that space, but I’m concerned on losing them as tenants if I approach it too soon. Their current rent is also over $200 below market. So I feel like it’s going to be weird to raise the rent and take space away. Any advise?

[Ryan Luby]

@Anthony Paul Guglielmi Sounds like it wouldn't be the worst thing if you lost them since the rent is well below market rents?

With that in mind, just be polite, respectful, and keep tenants informed but do whatever repairs you need to. If they cooperate then great, if not, it will be easier to do whatever work you need to their unit and then re-list for a higher rent.

We just completed our refinance on a BRRRR where we bought the property with inherited tenants in one floor. Ideally we wanted to renovate their unit, but because they paid consistently and on time we focused on the many other repairs we needed to do. We finished the vacant unit, marketed it, and got a tenant signed to a lease at a higher than expected rate. As a result we decided to offer the other existing tenants a one year lease at their current rent they have been paying (roughly $125/month below market rents).

Each situation is unique, but hope this helps

Best,
Ryan