Are you planning on investing in a Monterey County rental property? If so, it’s likely that the property could already have someone living there when you purchase it.
Inherited tenants are a huge asset because of the obvious reason that once you take over ownership of the property, you’re not going to have to start renting it out because the property is already occupied.
Even though inherited tenants are great, the reality is that there is a specific way that you should deal with them especially if you want to start your “relationship” out with your new tenants correctly.
Review Existing Leases
Before closing on the property, you will definitely want to review the leases for each existing tenant to verify the income and what expenses are the tenant’s responsibility. Do they match the financials that the seller-provided?
For example, let’s say you purchased a triplex and the seller claimed to get $500 per month, per unit. if the lease shows just $400 per unit, you have a problem. This is actually not as rare as you might think, as sellers like to talk about their opinion of “fair market rent” (what they think it COULD rent for) rather than what they are actually receiving. This is known as the “pro forma” rental income. If this is the case, start asking questions and be sure to run your numbers with accurate data, not pro forma numbers.
Put Yourself in Their Shoes
When purchasing a property that has inherited tenants, keep in mind that they are likely aware of the sale and are concerned about the unknown. They probably have a lot of questions, like “Who is this new owner,” or “Are they going to kick us out,” or “Is my rent going to be raised?” This uncertainty for the tenant can lead to a frustrating start to your relationship, so put yourself in their shoes and try to make the process as easy as possible on them.
Raising the Rent on Inherited Tenants
Perhaps you purchase a property with existing tenants and you know that the rents are far too low. This is common, as many landlords are reluctant to raise the rent even as the market rate climbs, leaving long-term tenants with leases far below market rent. When we purchased our 24-unit apartment complex, this was the case. Most units were renting for $475 per month when the market rent was a full $50 per month higher than that at that time. All the tenants were on month-to-month agreements, so we could raise the rent with just a 30-day notice.
Contact 36 North Property Management
To learn more tips for dealing with inherited tenants, or to speak with us about the property management services we can offer you, contact us today by clicking here.