Posted by PeteH(NYC) on December 21, 1999 at 21:17:42:
Another perspective on the deposit issue: I always charge at least 15% MORE than one month’s rent for the deposit; that way, it’s psychologically a different animal than rent, and if (as often happens in this burgh) a vacating tenant just assumes I’ll take the deposit for the last month’s rent, I’ve got a cushion in case there are any damages I need the deposit to cover.
Another thing to be aware of is whether your town has any rent regulations regarding how much you can bump this tenant at the end of a lease period. And that’s a question your atty, if you’re already hellbent on paying one, can help you with.
Good luck – my first duplex has been a winner for me.
Advice needed!! About to Purchase 2 family w/1 existing tenant - Posted by Jason Cullen
Posted by Jason Cullen on December 21, 1999 at 10:36:15:
Gurus,
I’m about to purchase a duplex in Providence that has a tenant living on the first floor. My wife and I are planning on taking the 2nd floor unit. The tenant has been there for 10 years and paid on time (but I believe the rent is lower than what I would charge by 50 dollars). I belive I should keep the tenant there, but I’m looking for some 2nd and 3rd opinions. Question 2 is, I have never owned property, so this is home #1. I’m assuming I need to make the tenant sign a new lease written up by my attorney and myself, asking for security deposit and possibly higher rent. I’m assuming this is the correct way to handle this situation, but again, I’m not 100%. If anyone cand lend guidance, I sincerely appreciate it.
Re: Advice needed!! About to Purchase 2 family w/1 existing tenant - Posted by Eduardo (OR)
Posted by Eduardo (OR) on December 21, 1999 at 20:02:07:
Jason–
I’ve been a landlord for many years. Good tenants are worth their weight in gold. First, you must find out if this person is a good tenant. That is, is it someone you WANT to be living beneath you. If the tenant is clean and quiet and pays rent on time DON’T DO ANYTHING to upset him and possibly cause him to move. A BIG rent increase immediately may do that. What’s the hurry? If he’s a good tenant, be nice to him and gradually raise rent over a period of time. Make him want to stay. A new tenant may be a lot worse and YOU live there. On the other hand, if you think he is going to be a noisy or dirty tenant, make sure his moving out is part of the deal before you close on property and take possession. Second, if you are going to keep tenant, visit him ahead of closing and obtain a copy of his lease or rental agreement and his hand-written statement as to current rent, security deposit (if any), and any other relevant information (other fees, pets, etc.). What you get from the old owner and what you get from the tenant should jive or somebody’s going to have a problem. Good luck! --Eduardo
#1 Does the tenant have a lease; if so that lease is in effect until the end of the term. #2 Has the tenant made a deposit; if so then the seller transfers that deposit to you.
If the answer to the above questions are no, then you should have the tenant sign a lease and pay a deposit. I always ask for deposits equal to one months rent. (Never call it first and last months rent, it is a deposit and is refundable if conditions of the lease are met.) Some good leases can be found at legalwiz.com.
1.Ten years is too long without a rent increase. Below market rent cannibalizes the value of the property, even in a 2-unit. I’ve lost some tenants by raising rent but you need to be at market or near market or go home.
2. Here you need to be paying interest on security deposits. Ten years of interest could add up, make sure you’re not stuck holding the bag.
3. I’ve always thought that a 2unit was a great place to start. Being a landlord is not a lot of fun, an owner occupied 2 unit is a good place to cut your teeth and decide from there whether to stick with it or move on. In the meantime the tenant should be paying more than 50% of your mortgage.
Good Luck,
David
Re: Advice needed!! About to Purchase 2 family w/1 existing tenant - Posted by Ed Garcia
Posted by Ed Garcia on December 21, 1999 at 13:26:14:
Jason:
There are many things you should do when taking over a new property.
Because I’m in a hurry, I’ll just get to the meat of your question.
What I would do is find out for sure what other apartments are going for in your
area. If this tenant has been there for 10 years without a rent increase, I would
say it’s about time.
Also Jason, I don’t feel it necessary for you to go to the expense of an attorney.
You can obtain a rental or lease agreement at you local stationary store.
If not go to http//www.lectlaw.com/formb.htm . or http://www.findlaw.com/01topics/03bankruptcy/publications.html
If you had a sizable project then the attorney route would be the way to go. But just to rent out one unit that will be in the same building that your living in, you will defiantly be hands on.
Posted by PBoone on December 21, 1999 at 12:36:54:
Sounds like you’ve answered the questions. Everything you are thinking is the same as we would do.
One thing would be to check with the seller about security deposit from 10 yrs ago, and keep in mind that it is easier to swallow a small incremental rent increase than a large jump.
Pat