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Ken and I have been landlords now for five months! The duplex that we purchased already had a long-term tenant in one of the units, so I thought I’d dedicate a post to the unique circumstances that come with buying a home with tenants already living there.
- Review the leases currently in place for the existing tenants. Before we even put in an offer on the house, we requested the lease for the tenant. We wanted to verify the amount of rent and to make sure that there were no crazy clauses in the lease. (Like a 5 year lease for just $10 per month or anything). We’d have to keep the current lease in place until it expired, since the tenant had already signed it. We both read through the lease probably ten times to make sure we weren’t missing anything unusual.
- Take steps to alleviate tenants’ fears. Through the realtors, we requested that the current owner inform the tenant that we were buying the house and planning on continuing to rent it out. We weren’t going to make the tenant leave and move ourselves in. We also asked them to tell the tenant that we were not planning on doing anything like hiking up the rent or making her move out at the end of her current lease. I can only imagine that if you’ve been living in a unit for many years, you might be afraid that the new owner might want to do something like make you move out at the end of your lease to, for example, re-convert the house to a single family home instead of a duplex.
- Ask for tenant’s payment history. Through our realtor, we requested copies of all rental checks that the current owner had received from the tenant for the past year. We wanted to have verification that the tenant had a strong payment history.
- Create lease addendums if desired. The current tenant had a dog, even though her lease with the previous owner said no pets. Since she was a long-time renter with an excellent payment history, we didn’t want to make her leave simply because she had a dog. So, we requested that our property manager have the tenant sign a “pet addendum” to the lease, where she indicated the size and breed of the dog, and that any future pets would have to be approved, etc.
- As closing approaches, prepare a welcome letter for the tenants. We had our property manager do this. The welcome letter included the contact information for the maintenance folks, including the 24 hour emergency number, and the new rental payment details, like who to make the rent checks out to.
We also read tips from around the web and in several books, such as The Book on Rental Property Investing.