Inheriting a Tenant Question

[Anthony Sgro]

I currently have an offer accepted on a duplex in the Indianapolis neighborhood. One side (2 bed, 1 bath) will be rehabbed and rendered out upon purchase, while the other (3 bed, 2 bath) currently has a tenant from the previous owner.

The tenant has been in the property for multiple years and seems to keep the property in good condition. They pay well below market value for rent, due to being related to the previous owner. Their current lease ends in December and they are on the fence with resigning for a higher price or moving.

Initially, I want to gauge their interest by meeting in the middle and offering them a slightly high rate, while extending their lease until the springtime. This will allow me to find a tenant for full market value in the spring, in addition to giving the current tenants a better time to find a new place (if that’s what they choose).

Any thoughts on this situation?

[Brad Gibson]

I would offer them choices. 

Offer them a 12 month lease that increases their rent some toward market rate. Offer a second option for a six month lease at a rate that is a step higher than the annual lease rate offered.  Finally, offer to transition them to month to month at full market rate. 

I’ve found tenants respond better to tough news (your rent will be rising) if there are some options. They of course have the opportunity to walk at the end of their current lease, but this way gives them a chance to stay  This is especially good if they’re a great tenant who pays on time & takes care of the house. 

My $.02