If you are an active real estate investor, chances are that at some point you will inherit tenants when you buy properties. There are many different things to consider when deciding how to approach existing tenants and this post will cover most of them.
This article is especially helpful for landlords who have bought a property with tenants living in it because it can provide valuable insight into how to handle problems like rental arrears or eviction if they arise. Inherited tenants can sometimes present unexpected challenges but with these tips, your transition into the new property will be easier than expected!
Buying an already rented property
It sounds tempting to buy an already rented property. There are websites like Roofstock dedicated to providing turn-key rentals. Although this is an ideal situation for landlords because they can start collecting rent immediately, this can be a difficult transition into Landlordhood for someone without any experience managing rental properties.
What you should know before signing an offer on a tenant-occupied property?
These are the documents and money you need to request from the seller before you close on the property:
- Lease
- Deposit and advanced payments
- Bank statements for at least six months to see when the rent was paid
- Application – the application will have all the tenant’s information that you may need in the future.
- Tenant Estoppel Certificate
Make the sale contingent upon receiving these documents.
If possible, talk to the existing tenants before signing the contract. Ask them if they are planning to stay and what their future plans are. In passing, also question what can be improved in the rental.
When you want to keep the tenant
Inherited tenants with a lease
If the tenant has a valid lease and the agreement doesn’t have a clause that specifies what happens when the property is sold, then the landlord and the tenant have to honor the existing lease.
After taking over the property, it’s best to first send a certified letter informing the tenant that you are the new owner. The following information should be included:
- The new contact information for the landlord or property manager
- Where and how they should pay rent. This should be in keeping with the lease.
- Contact for emergencies and repairs
- The name and address of the new financial institutions where their deposit and any advance money will be held.
In addition to mailing a letter, the new landlord and/or property manager should call and introduce themselves.
Inherited tenants with a month-to-month lease or with an expired lease
If the tenant is on a month-to-month lease, the landlord can either terminate the lease with 15-day written notice or write a new lease.
If the landlord wants to keep the tenant writing a new lease with new terms is better than renewing the old lease.
Tenants with no written agreement or lease
If no written agreement exists between the landlord and the tenant, the best thing to do when buying a tenant-occupied property is to get both parties: the selling landlord and the tenant to sign an estoppel certificate. This will eliminate any misunderstandings. What should be spelled out in the agreement is pretty much what is in a written lease
- Start and end date of the tenancy
- Principals and occupants that are allowed on the property
- Rent price
- Security deposit held
- Advanced rent held
- Who pays utilities
- Who pays for maintenance
- List of appliances, window coverings, and other personal property belonging to the tenant.
- Any work for rent or other arrangements with the landlord
- Is the rent current, if not how much is it in arrears.
When you want the tenant out
If a landlord wants the tenant out and there is an existing long-term lease in place, the best thing to do is to try to negotiate for early termination of the lease. This usually involves paying the tenant to move out or some call it “cash-for-keys”. This is a good way to negotiate with squatters and owners of properties that have been foreclosed on. Cash-for-keys is a better deal for everyone involved. We have done it many times, it works it saves us a lot of money and time.
If the tenants agree to terminate the lease early, it’s a good idea to get them to sign an Agreement to Vacate and Confirmation of Vacating the Premises.
If the tenant is on a month-to-month lease, the landlord can send a 15-Day Non-Renewal Notice. The tenant needs to have 15 days from the date the notice is received.
What to do if tenants refuse to move out?
Sometimes landlords may have to deal with holdover tenants. Unfortunately, if cash-for-keys and negotiations don’t work, an eviction has to be filed. In Florida, it takes around 30 days to evict a tenant. Here is the timeline and the process for eviction in Florida.
Hopefully, this article has given you some helpful information on the topic of inherited tenants and how best to deal with them. We hope that by reading, you have learned a few things about what to do to keep the good tenants and let go of the bad ones. If not, we would love for you to leave us a comment below.
