Under contract, Inheriting tenants In first house hack
Hello Everyone!
After making what seemed to be an endless amount of offers in this hot market, with a lucky turn of events of a sellers contact falling through due to the first place buyer unable to to afford financing. The sellers reconsidered my offer and I am finally under contract for my first
side by side duplex house hack here in Liverpool Ny!!!
One side of the property is currently occupied by a tenant whom has been there for almost a decade and is paying below market rent @ $880/mo WITH utilities included for a 3bd 1ba... Obviously I plan on increasing his rent to market value and switching utilities but hesitate increasing it past 20% due to the fact that during our walkthrough he seems like a solid tenant with a very well kept unit and even bought his own washer and dryers in the unit. My concern is, even though I am obligated to honor his lease until the end of June (estimated closing is June 15th), I don't know anything about him beyond his name. I have included an addendum for the seller to not alter or enter a new lease before or after closing which will give me the chance to enforce my new lease at the beginning of July if everything turns out all right and if extending past June than lease will be transferred month to month.
I'm assuming I would still run the current tenants through my own screening process. Do I move forward with them filling out the application before I've even closed on the property, along with paying for the credit/criminal/background check and sending them the Estoppel Certificate?
or have the current seller provide said info. with proof of payment and or renters insurance, turnover of security deposit & first months rent which my attorney will also be collecting, With it being such a quick turn-around with their current lease expiring I want to have as much lined up as I can and be the most prepared I possibly can.
Currently Still in the process of bulletproofing the new lease along with the operating and reserves accounts & setting up account/property management software. If anyone could provide some type of guidance/info. towards this process of inheriting tenants within my first house hack that would be greatly apricated!
Thank you all for your time and communication!!!
#3 House Hacking Contributor
- Cleveland, OH
Elijah,
Congratulations, this is awesomes! Great job on being persistent. I feel you because I'm actively looking for my first house hack in a competitive market.
I don't have a specific answer because I don't have experience doing this yet. Commenting on this post to hopefully give you some more reach.
Keep crushing it.
-Ben
Hi Elijah,
Posting here because I am in the EXACT same situation as you! Almost every single detail of your post rings familiar. Accepted offer currently in Ulster County, NY, expecting to sign contracts tomorrow. Closing July 1st. First house-hack.
Inheriting tenants who seem ok but are paying under market. Was important to the seller that we kept them, and we believe our offer was accepted because of it. (Our offer was accepted, then not, then was again...)
We agreed to keep them, but ONLY if they passed all the background checks, sign a new 6-month lease that we write and provide them, and submit a security deposit.
After the 6 months we will need to navigate that as we plan to make upgrades to the unit and raise the rent. We opened an account with Innago for PMS (it's free). The tenant screening will take place there.
We need to start on writing the lease, haven't even thought about it yet really. I suppose I'll take a look at some templates the software provides, but I'd love to hear some specifics on how your lease will look! What's an Estoppel Certificate?
Hope to connect. Also following for other feedback.
Raise the rent.
Utilities probably run $150 a month, conservatively. That means you are getting $730 rent, and the market rate is probably $1,200 or more. That means you are losing $500 a month or $6,000 a year.
Study the market and know what you are worth. Offer it to the current renter at 10% below market with him paying utilities. If he wants it, screen him to verify he can afford it. If he doesn't want it or can't afford it, reward him with 60 days time to find another place, then find a new tenant that can pay what it is worth.
