Inheriting Tenants in Providence, RI

[Gabriel L.]

Hi RI Investors,

I am looking to purchase a multifamily property in Providence, RI that has tenants with year long leases. Does any one have advice on key things to do before you inherit tenants— from the letter of intent/draft P&S to actual closing? Would you recommend estoppel agreements? Has there been anything you wish you knew before you inherited your tenants?

Thanks in advance!

- Gabriel

[Sam Albert]

Hi @Gabriel Long, So inheriting tenants after purchasing a home doesn't always end up being a good thing. In my opinion, I would rather inherit tenants that are in a month to month status. Remember, you didn't choose these tenants. The listing agent is always going to tell you "The tenants are great!". It won't be until after closing, that you realize, the tenants you inherited aren't exactly the "type" of tenants you would grant tenancy. 

You should ALWAYS get an estoppel, but the common estoppel form in RI doesn't really detail the tenants' rental history. It simply confirms the rental amount, if the tenants have a deposit, and if their rent is current. So, there's no way of knowing if you're inheriting a "good" tenant, based on their payment history.

Another reason why it's not exactly best to inherit tenants in a lease, is most times the rents are lower than you would like. You are unable to raise the rent until the lease agreement ends. Then, when it does end, the push back that you may get when raising the rent on a tenant that has been there a while is that they "can't afford the increase and it's out of their budget". If you were able to choose your own tenants, the higher rental amount would have already been the expectation, and the tenant you chose would have been looking in that price range to begin with.

Lastly, I always recommend month to month agreements across the board. The way the laws are written in RI, it's a challenge to evict a tenant in a lease agreement... especially, if they're paying rent. For example, let's say you have a tenant in a lease agreement, and they pay you every 20th of the month, the other tenants say they play loud music often, and maybe they don't take the trash consistenly. IT WILL BE TOUGH TRYING TO EVICT for a reason other than non-payment. That's just how the RI courts are. If they're paying, unless you have hard proof of non-compliance, the judge will most often side with the tenant. 

If they were in a month to month, all you would have to do is give a 30 day notice of termination, without needing a reason, and they have to vacate the premise.

Now, you may say: I don't like month to month because I don't want to have to keep having vacancies...

From my experience, if you give tenants a nicely renovated unit, have a fair rental price, and be a proactive landlord, tenants are going to want to stay with you. It also keeps THEM on their toes, because it's harder to find an apartment than to find a tenant right now.

Don't be afraid to pick you own tenants, and don't be afraid of month to month agreements.

Just some food for thought.