Taking over existing tenants

[Christopher Cannon]

Buying a duplex that already has one lease and one month to month on it. Rent is way below market. How do I go about taking over the leases, acquiring the security deposits that were made, and possibly raising rents as soon as possible. Is there a probation period after purchase to raise rents etc. this would be my first multi family and my first home taking over existing tenants. Thank you 

[Patricia Steiner]

I recommend you do none of that...you want to buy the property, not the seller's problems and inherited tenants can be challenging.  I recommend that you write your offer to take 'vacant possession' upon closing.  That will leave it to the seller to give notice to the month-to-month tenant that the lease will not be renewed and to negotiate with the other tenant on an early departure.  It is easier to acquire new tenants at a new price - and on YOUR lease - than to assume the tenants based on the seller's lease which you must honor fully until maturity.  That means that you would only be able to raise the rent on the MTM tenant and not the other one.  

Most contracts have a stipulation that within 3 to 5 days after an executed contract, the (copies of) leases/rent rolls/more are to be turned over to the buyer as part of the vetting process.  You may find at that time that there are no security deposits or actual leases in place.  The closing agent will arrange for the transfer of any security deposits at closing and will prorate the rent.

Again, if you buy a property with the tenants in place, you bought their leases too.  Please consider vacant possession as a condition of the sale and then acquire new tenants on your lease, with security deposits, your rent price, your screening completed, and renter's insurance in place.  

Best...