Absentee Landlords need guidance

[Kevin Lindahl]

Hi all. Newb here! My wife and I purchased our first investment property in MI.  It’s a small duplex in Hastings, MI.  We closed last week and are going to talk to current tenants this afternoon. Curious if other members can lend any advise.  We plan on asking for a 1 year lease and want to increase the under market rent they’re currently paying. We thought we’d advise them today that we plan on doing so 3/1/21. Is that enough time “legally”? Also, we’re unable to personally meet them until around the end of next month. We had planned on doing an inspection checklist with them then. Should we have them both do so now and we “verify” their findings when we visit?  We plan on managing the property ourselves since it’s just 2 units and we don’t really have “room” in our budget for professional property management. (After rent increases we’ll be at 6.74% Cap Rate and 11.5% cash on cash.)  ANY other thoughts, recommendations,etc. are greatly appreciated. Thank you

[Nathan Gesner]

There are quite a few questions here. 

If they are under an existing written lease, you have to honor that because it transfers with the sale. If it's month-to-month, then you generally have to give 30 days notice of any changes, including the requirement to sign a new lease. You don't say what state you are in. Check the laws because some require a longer notice.

If the renters are more than 10% below market rate, my recommendation is usually to terminate their lease, clean the place up, and put in new renters at market rate. Why? Because rent increases larger than that may be unaffordable or may cause animosity and create problems down the road.

I'm not picking on you, but I want to point out that if you can't afford PM then you probably didn't purchase a good investment. Your analysis should allow for enough income to pay someone to manage the property. It's extra income if you manage yourself and it's a safety net in case something in your life changes (or you totally suck at being a Landlord) and you have to hire a property manager.