Ypsilanti - Rent by the room

[Balaji Srinivasan]

Hello- I am new to BP, and we are considering an investment property. This is a 9 bed 2 bath property that has been rented by the room for many years.

What are things to consider when buying? All tenants are M2M, obviously we dont know who they are. Would it be better to start with a blank slate and ask for vacant possession, or to inherit the tenants, transfer the security deposit and leases to us when buying and draw new M2M lease? 

The rents are undermarket and we would like use the turnover over time to fix areas and raise the rents. Is that a good strategy?

These are not student rentals, all the people living are between 50 and 80 years old. 

Appreciate all your advise and support.

Balaji

[Matt Hurley]

What is your investment experience? Are you new to BP or new to investing entirely? My first question is, is this property zoned to rent to 9 people? I invest in Ypsilanti and most non-residential zonings only allow "3 unrelated adults" per unit. If this is a huge single family house and not separate units, you may not be able to rent to 9 people whether the previous landlord got away with it or not. New owners = new inspections. 

Assuming you CAN rent to that amount of people, taking into consideration eviction proceedings is worth a thought. Yes, they're on month to month so it's technically a 30 day notice not an eviction. But given that the population is elderly there's a likelihood you may get some legal push back from them or from their families. In my head, it's a big question as to how much under market are they. If they're way under, can you sign a more permanent lease with them that slowly increases the rent to market over the course of a year? Losing renters and finding new ones can be costly, and only worth it if the rents you can charge for a refurbished unit are significantly higher in my opinion. 

Post some more numbers here and we can give you a more accurate opinion :)