All Forum Posts by: Ben Larson

I bought a duplex that is currently occupied on both sides.  Both tennants have a month-to-month lease which contains a provision of 45-day notice.  We close on June 15th at which point I will give notice to both sides because we are going to owner-occupy and raise the rent and change lease terms for the other side.  We will take occupancy on one side on July 30th.    I was able to get a good rate on homeowners insurance for the long term, but I am looking at having to purchase a policy for the 45-day period before we take occupancy.  This might cost me as much as $600 because my agent cannot find a policy that will only last 6 weeks... instead we would have to buy a year-long policy then pay a hefty cancellation fee and start our normal homeowners policy.    Does anyone know if a "gap" policy exists for maybe just $200-$300 to cover 6 weeks?  If so, where is a good place to look for something like that?  

Thanks!

I am excited to have a duplex under contract that my family and I are going to owner/occupy as we get started with real estate investing. 

I am also nervous about a few issues I could use some guidance about:

We will have to significantly raise the rent for whoever is staying.  The current tenants are paying only $1440 per month in a market that is getting 1800-2100 monthly for comparable properties. The current tenants have been there for 6 & 8 years respectively.  If they are savvy to the situation they probably know an increase is coming, but I wouldn't bet that they have put the pieces together and they probably won't react very well to the news.  They signed a one year lease in 2011 that turned to a month-to-month after the year term with a 45 day notice by either side for vacating.  It has been that way since... we will take over the lease upon closing around June 15th so that puts us to August 1st before we can have one side sign a new lease with us if they choose to pay the higher rent and have the other side move out so we can move in.  

I am open to any and all suggestions & advice about how to handle this situation. 

    - What is the best way to inform the current tenants of the price increase?

   -  When is the best time to do so? Would you advise any "warning" or "heads-up" before the closing date?

  -   The tenants have paid their rent on time, so I am interested in keeping them if they agree to the price increase... what do you suggest if they both want to stay?  We have to kick one of them out..  (we have no preference about which unit we prefer.. they are identical)

-  We have not settled on the exact monthly rent we will charge yet.  The minimum will be $1800 per month because that is what the market bears.  Getting $2100 is obviously ideal and will create a very nice cash flow... With good tenants though, is it smart to consider offering something like $1700 for the first year and let them know we will increase every year until we get to market value?  My thinking here is that it will cost us less to keep good tenants in rather than turn over the unit. 

- I am worried about making whoever has to move out mad and that they will do damage on the way out... The seller is giving us the full security deposits so I can use those as incentive to be good, but is there any advice you would give with this?

- If you have been through a similar situation either as someone who needs to owner/occupy or someone who had to raise rents significantly upon purchase, please let me know if I am missing anything or if there are questions you can answer that I haven't even thought of.

I look forward to getting some help - Thanks!

Ben

Thank you all for great advice!  I am going to look at the property again today and I will ask my realtor to talk to seller and try to get some of this information.  I'm sure I will have more questions and I will let you know what I find.

Thanks Again!

I am strongly considering a duplex to owner occupy for my first investment property.  It checks all boxes in terms of quality, space, schools and neighborhood. My concern is that the rent amounts from the current tenants are really low and don't make sense with compatible properties found on Craig's List and Zillow.  Both sides are 4 bedroom, 3 bath  currently renting for $1440/month. The three properties that compare are listed for $1850 and $2095/month.  I don't know much about how long the tenants have been renting although they are both on a month-to-month lease which I also find strange.  The property is in really good shape and well taken care of.   As I mentioned before it is in a very good neighborhood and very close to a good school.  It is only 10 years old.  It has been on the market for a little over 2 months and had one price reduction on the listing of 10K in Mid-April, also factors I find curious.  I have run the numbers and if I get market-value rent it will cash flow very nicely.  My plan is to buy the property, move into one side and raise the rent to market value (plus a 1-year lease) on the other side, either with the current tenants or by finding new ones.  Because I am new I feel like I might be missing something which scares me.  If rents are below market value with current tenants and a property has been on the market longer than you think it should be in today's environment, what does that mean?  What would you do to make sure you are purchasing the right property?  Please let me know your thoughts.  Thanks!

Thanks JR T.  

My main thought process is just to see if I can get 2 units under one traditional loan to allow me to have more total units available to traditional financing.  I'm not sure if this would be best or not and I didn't think about the separate taxes on the two parcels so that is good information. 

Hello!

I am brand new to Bigger Pockets and to real estate investing... guess that makes me a "newbie" :)

My wife and I want to get started in investing and we have taken a first step by putting a 1/2 Duplex under contract - closing at the end of June. (this will be our primary residence to start) My question is, if/when the other half of this duplex becomes available, does anyone know if we can purchase that half and then re-finance both loans into a single loan for the whole duplex?