Member intro. Just closed on first multifamily. And a question.

[Nathan V.]

Hello all! It feels great to finally make a post after observing this forum for the past year! Everything I have learned up to this point has been from everyone that writes in this forum and of course, from the BiggerPockets podcast. Friday afternoon my wife and I closed on our first property which is a two family unit here in West Michigan. We plan on living on one side while we redo some items in the unit. Also, while satisfying the 12 months required by FHA.

We found the unit by driving for dollars one Sunday afternoon looking at all the multifamily properties in our town. After getting the addresses of all the owners, we sent our massive mailing out that consisted of 25 letters. It was an absurdly low number but I liked these units and there are not that many in the area we wanted to be in. I never expected a call but two days after I put them in the mailbox we got a text from the owner stating he wished to sell his current property. I was in shock to say the least but after texting back and forth I finally spoke with him on the phone. We agreed to meet and take a look at the property as he was just about to list it on the MLS. We took a tour, talked for a bit, and asked what the price was. After learning what he was asking, he gave us three days to make an offer before he listed. All the numbers worked using the bigger pockets rental calculator and we let him know we were in. Fast forward 45 days and we are owners of our first Multifamily!!! We met an amazing realtor along the way that the owner was going to list with and plan on working with him for our next property. There is more to the 45 day story than I have here but the unit is solid and needs minimal work. However, I can say we did it. We got an off market property at a good price in a very competitive market from everything we learned here.

On to my question with a ton of buildup.  We inherited a tenant that has lived in their unit for 20 years. Her side is in immaculate condition but she is on a month to month lease paying $350/month below market rate for the same amount of bedrooms and square footage for our area.  The former owner explained he never had the heart to raise rent on her.  She was a great tenant, was never late, and had zero issues.  I spoke with her today and introduced myself and stated that I would need her to sign a lease in the near future.  I also said I was willing to keep her at current rent for December and January.  The former owner suggested I work her rent up every 30 days until she is at the number I decided on which is about $100-$150 below market rate but I am willing to take the small loss with how good of a tenant she is.  She clearly did not want an increase in rent but understood it is what it is.  I discussed the increase spread out over a few months with her and asked if she would be ok with it.  Signals seemed mixed, so here is my question.  Does it sound like a bad idea to approach her with a lease in a few days that starts 03/01/17 at the rate that I came up with and let her know that January and February will be at her current rate?  Michigan law states that an increase with no lease has to be signed and provided 30 days before the increase is expected to be paid.  This way I am giving her roughly a 75 day notice and if she decides not to sign it she can start looking for a new place.  I feel like many will look at this as a headache but I do not want to lose such a stellar tenant especially while we are living on the other side for 12 months.  Any advice helps and we look forward to getting to know everyone in our area that is a BiggerPockets member and everyone else on the forum!