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Updated about 4 years ago, 09/26/2020
MORAL DILEMMA - EVICTING SENIOR CITIZENS
a question of morality. i need to rehab my 4 unit but i've inherited 2 long term tenants (senior citizens). there rents are way below market and i'm not sure how to ask them to leave. one guy is in his 90's and the other in his 70's. they are both on fixed incomes and the increase in rent will definitely shock them. the building is in need of repair and i'm in need of a refinance soon after rehab. any thoughts?
I don't have an answer for you but what I do when purchasing a property with existing tenants in place I underwrite the purchase at the current rents. If it doesn't make sense with the current tenants there I won't purchase the property.
I may give them a small rent increase of $15-50 dollars. I still have some inherited tenants many years later. Most were under market rents when I purchased and still are below market rents but it really doesn't matter since the original purchase price met my criteria when I purchased the property. I currently have 5 tenants who will probably be with me until the end assuming their health allows them to stay. I will trade reduced rent for 10-25 years without a turnover.
#5 Multi-Family and Apartment Investing Contributor
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#5 Multi-Family and Apartment Investing Contributor
- Investor
- Shelton, WA
@Jimmy Rivera I have and have had seniors in my buildings most of whom have had no problems paying rent; but sometimes under market.
Always stay UTD with their families if you can. In my case they have helped with rent, cared for the tenant when required, moved them, and even cleaned out the apartment after the elderly tenant died. Many seniors have good incomes from pensions.
Get their families, or find local agencies, to help move them so you can do the rehab, I don't think it should come to an eviction. I would not want to be the LL who put grandpa out on the sidewalk!😦
@bjorn ahlblad @david wandel these are both great options. thank you for your feedback. i got a great deal on the property. my best deal ever actually. the building does cashflow at current rents. a long term tenant is always a good thing.
A bigger problem might be how extensive is the rehab you need to do? As in, is it so extensive that people really couldn't be living there while it's going on? If that's the case, you might need to give them a Notice to Vacate anyway. If that is the route you want to take, whether for rehab purposes and/or the way below market rent, it would be a kindness to offer them one or more of the following: longer time to move, assistance with moving expenses, and/or financial resources available for senior citizens.
And I'll be the mean person who says it, "No one is owed a low cost place to stay because they didn't plan properly for their retirement." I am sympathetic to people in that situation. It's a tragedy that personal finance classes are largely not taught in school and many Americans are under the delusion Social Security is enough to live on. It's an erosion of our economy that overall wages have not kept pace with the cost of living, much less having extra room for retirement planning. But none of this is your fault or my fault. I'm running a business, not a charity, and my sympathy ends at my wallet. I'm not selling my services, ie my rentals, at a substantial discount in order to subsidize a stranger's lifestyle, just because they're elderly.
Well said ms jennifer t. Thank you for your grest response.
#3 Managing Your Property Contributor
You are running a business, but if this will keep you from sleeping at night, rehab the two less desirable units based on location, move them in at a slightly higher rent, then rehab their current places and rent them out at market value.
@Jimmy Rivera
I have a similar situation. I need to renovate but I am going to to see if they can get section 8. That way they can stay and I can get a boost in rent. I meet with them Sat. We will see.
My grandfather is in his 90s, however he planned extremely well for his retirement. That being said, did the tenants realize that you were purchasing the building- they may/may not have had an inclination that this could happen? Can you rehab one unit at a time? Do they have family that could house them for four weeks and you not charge rent for that month?
I really think turnover carries a heavy price tag. There is the actual cost and the mental energy and your time.
I see both sides.
Also, I know our lender said seasoning periods for refinance have changed with covid, so that might be something to check on.
Good luck!
What you really need to be looking at is how much will the rehab cost vs. the time to recoup those costs. It will be hard for them to move and they may be expecting a moderate increase which you can most likely implement and come out ahead without having to spend any money or at least minimal. These people are most likely going to be long term and as others have said vacancy is a killer. You say way below market which could mean different things to different people but realize they will find out what market rents are which may make them willing to take a decent increase knowing there isn't anything cheaper out there and moving is a hassle. A big factor for me would be the refi, are you going to be able to cash out more if rents are higher. My goal in rentals is to make the most money possible with the minimal amount of effort so I am trying to minimize vacancy and renovations. That is my mantra and my properties are B+ to A- but long term tenants with minimal effort would be something I would appreciate since I have a full time job and young kids but everyone's situation is different. Covid may also play into your immediate decisions since they are fixed income they are more likely to continue to pay and have already considered rent in their budget.
Well said ms jennifer t. Thank you for your grest response.
Well, you could evict the 2 able-bodied ones and put them in those units while you rehab theirs. Or a LT hotel.
Alternatively, I'd wait for a big snowfall so when you throw them out it'll cushion their fall.
#3 General Landlording & Rental Properties Contributor
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#3 General Landlording & Rental Properties Contributor
- Rental Property Investor
- Los Angeles, CA
You run a business and while I'm not suggesting that you be cruel, you have to look out for yourself. Every $1 that you don't earn today is going to be $2-$3 that you don't have for your retirement. Do that enough and you'll end up being the old guy renting an apartment and then having to move when your new landlord raises your rent.
Talk to them. Let them know your intentions. If they can't pay, you can give them some extra time to move. Instead of the 30/60 days required, nothing wrong with saying that March 1, 2021 the rent increase will take affect, but you can vacate any time before then without penalty.
You also need to look at your local laws. In some places you have to pay tenants, especially elderly, if you force them out.
@Jimmy Rivera Maybe you can work out a deal and get them on section 8.
Phenomenal responses. So many great tips for me to consider. Thank you all.
Originally posted by @Jennifer T.:
A bigger problem might be how extensive is the rehab you need to do? As in, is it so extensive that people really couldn't be living there while it's going on? If that's the case, you might need to give them a Notice to Vacate anyway. If that is the route you want to take, whether for rehab purposes and/or the way below market rent, it would be a kindness to offer them one or more of the following: longer time to move, assistance with moving expenses, and/or financial resources available for senior citizens.
And I'll be the mean person who says it, "No one is owed a low cost place to stay because they didn't plan properly for their retirement." I am sympathetic to people in that situation. It's a tragedy that personal finance classes are largely not taught in school and many Americans are under the delusion Social Security is enough to live on. It's an erosion of our economy that overall wages have not kept pace with the cost of living, much less having extra room for retirement planning. But none of this is your fault or my fault. I'm running a business, not a charity, and my sympathy ends at my wallet. I'm not selling my services, ie my rentals, at a substantial discount in order to subsidize a stranger's lifestyle, just because they're elderly.
This. I don't care how old you are or aren't. You'll be treated the same by me as long as you pay me. It's not all about the money...but it is. I have empathy but no sympathy. I prepared, you should have too. Longer move time would be the option I would offer, or you can stay if you can get to the market rent in your budget. If that's not possible, I'm sorry, but you've got to go.
a ton of varying opinions and suggestions. i appreciate all of them. many, i hadn't thought of myself. i bought this 4 unit so cheap that on a flip (with no additonal work) i may profit over 100k. this too is another option i am entertaining.
thank you all for your thoughts.