All Forum Posts by: Forest K.

Thanks, All. I'm new to the process and wasn't confident that month-to-month leases were legal in MA, but it looks like they are (I've already adapted one from my landlord association). So, it might be wise for me to put all tenants on our own month-to-month leases. 

Yes, @Douglas Snook, all tenants are month-to-month on their current expired leases, so I'm not obligated to keep any of them. However, one tenant's original lease has disappeared. So, short of an estoppel agreement, I worry this legal vagueness might cause problems in the future unless we put him on our own lease (which would be month-to-month).

The financial strategy (or, risk management) is still the question I need to sort out. If we can find a Massachusetts lender that will give our LLC a HELOC, then, yes, we could raise rents now and not worry about creating vacancies. However, short of that, it may take us 3 months to a year to secure financing (which will likely come from equity in a house my brother plans to refinance in 3 to 6 months). So, I'll start calling lenders, but, short of that, I'm not sure we want to take the risk of creating vacancies. We'd be more comfortable planning to give the current residents plenty of notice and begin to raise rents starting in 3-6 months. Then, if we are lucky, they'll leave one at a time so we have some time to rehab each of the four units in turn (there is one empty unit that needs a serious rehab before it can be rented). I've followed the other threads here and I know that the advice tends to be "treat it like a business and rip the bandaid off," and I understand that, but until we have financing secured for the rehabs, the risk of creating vacancies doesn't seem worth it to me.

I should also note that we're getting a bit of a deal on this building through relatives because there is a lot of deferred maintenance. So, we likely need to do more than a quick clean-up to get market-rate rent for each unit. I'd hate to get stuck in a situation where a tenant leaves, we don't have financing for a proper remodel, and then we're debating whether to take on a new year-lease for a tenant at a below-market rate or leave it vacant until we secure remodel financing. So, again, there is some risk mitigation in not raising the rents too soon.  

Happy to hear your thoughts. 

I'm a novice property owner/investor, but if you get the LLC first, you're unlikely to find a traditional lender that will give you a HELOC (I've heard that smaller banks sometimes work with more experienced investors to provide HELOCS). They tend to offer them only for properties owned by people not businesses (if your business went bankrupt, they may take second seat to other debtors and they are "limited" in their ability to go after your personal property to recoup their losses). But, the simpler thing to do is call your potential lenders and ask them what they would offer you given these scenarios. Generally, those using the BRRRR method (and not using private money) would avoid putting the property in an LLC until they finished the rehab, rent, and refinance stages. Once the building is stable and secured with a long-term loan that allowed you to get your equity out as cash, only then would you prepare to put the property in an LLC (of course, even then, the bank might not be happy about you doing this while you still owe them, so you'd need to be cautious about the bank demanding full payment. But that seems rare).

Thanks, @Nathan G. I didn't know about this estoppel certificate. That's very helpful information! I'll have to inquire with my lawyer. 

@Steve Smith, I do want the tenants on my lease eventually, but I don't want them to think any changes are coming. I'm also not sure what leverage I have regarding incentives to sign since their rent is already ~30% below the market rate. Though, maybe they'd be happy to simply sign something with their current rent as it would alleviate their fears of us increasing the rent?  

I'm about to take ownership of a four-unit property in Massachusetts with my partner. Neither the owner nor tenant have a copy of one tenant's lease. They do have signed confirmation of the tenant's security deposit amount. The tenant is now month-to-month and we're not really concerned about him trying to do anything inappropriate as his track record is OK (besides needing to remove some of his stuff, including an unregistered car, from the yard). I'd also prefer to keep the tenant month-to-month for rent-raising-flexibility because he's paying well under market rate. But my partner and I need some time to pull together financing for renovations and we don't want to risk having him leave before we secure it (which may be up to a year). 

Do you have any advice on how to proceed? Is it legal or advisable to have a tenant with no lease? If so, are we then required to put him under some contract? The other tenants' leases are identical across a number of years, so it is assumed that his lease is the same. Do we recreate the old lease based on the others and ask him to sign it as a replacement?   

Thanks!