3 months out from closing - interesting predicament

[Brandon Courtney]

Hello All,

Correction: 3 WEEKS out from closing!

I am new to the BP community and excited to make this first post. I have an interesting predicament and I'm seeking advice of the BP community to make the best decision possible.

Keep in mind this is in upstate New York where the moratorium on evictions just got extended until May, 1st 2021.

I am 3 weeks out from closing on a 4 unit multi-family property. It was an estate sale. Two of the 1 bedroom 1 bathroom units are currently occupied by friends of the previous owner. They are also friends of the executor (daughter in law of previous owner). The tenants currently have no lease, and no security deposits was ever taken. They have been paying $500 a month (well below market rate of $800/month). The landlord is responsible for trash, sewer, water, and heat (utilities are tied together). The tenant is only responsible for electric and Wifi/cable (Wifi/cable if they choose). The sellers agent told me that both tenants have been paying the $500/month even throughout COVID.

I will be owner occupying one of the other units in the house because it is an FHA loan. The property is in a very good location where I could get $800/month fairly easy for the 1 bedroom 1 bath units. How can I approach this situation tactfully where I can raise the rent to market rent without the current tenants retaliating for the $300 increase and deciding not to pay but instead camp out free of charge?

I am assuming they will have an issue with the increase even though they very well may not. I want to be prepared. One of the tenants is still working and the other is collecting social security/other retirement aids I believe. The tenant collecting social security has 3 cats (the apartment looked to be in pretty good shape even with the cats the couple times I have been in).

What process do you recommend I follow to transition them from having no lease and no security deposit to raising their rent ~$300/month, getting them into a lease (monthly or yearly?), and collecting security deposit? Should I charge a pet fee or increased rent per month for the fact that the one tenant has 3 cats?

I appreciate all of your help in advance and if you need to ask further questions to clarify please do!

Brandon