Inherited tenant on fixed income

[Emmanuel Morales]

Hello everybody I’m getting ready to close on my first property. I’m going to be house hacking a duplex with 1 inherited tenant on a month to month lease. They’re currently paying way below market rent and are on a fixed income(social security). The vacant unit is fully updated the other unit is not. I would like to move into the occupied unit so I could fix it while I live there and maximize rents on the updated unit. The tenant is an older lady and i don’t want to be the bad guy but I also want to make the best financial decision I can. How should I go about the situation. The property is in Aberdeen Wa State 

[Rick Albert]

First of all, you are in Washington State. Check local laws to see what you can do. Being on a fixed SS income, she may have more rights than you realize.

Raising rents isn't going to do much good because it isn't like she can pay more (this is assumption, she could be a millionaire living below her means for all we know).

Raising rents or having her leave, you are going to look like the bad guy. Even if you offered her tons of money. You are going to have to be able to sleep at night. 

To Bruce's point about making her understand you are losing money, that's not her problem and she likely won't care. She can make the argument that you are putting her in a bad situation if you raise rent. I wouldn't go down this path. This will just make you look greedy. If you lay out the cost of ownership (maintenance for example), then that is a different presentation.

If allowed, it might be interesting to say that we are going to gradually increase your rent. For example:

Now: $1,000/month

3 months: $1,025/month

6 months: $1,050/month

1 year: $1,100/month

I've never done this before but it might be an interesting concept. Show her what current rents are so she understands she is still getting a deal. Vacancy can be very expensive.