As a new Investor you will find that most of the time you will inherit a tenant from the previous owner and you think this is a great thing; you won’t have to pay for advertising and you have a built in rental stream already coming in.
This could be true however it is your responsibility to make sure this tenant is someone that you want to keep or legally have to keep. Like everything else in a new acquisition, DO YOUR DUE DILIGENCE.
Make sure that you receive an estoppel certificate signed by the tenant. An estoppel certificate is a document that outlines that everything is the way you were informed. The certificate refers to the current lease and the terms of the existing lease (if there were any changes). The tenant signs off that they agree everything in the lease is as it seems and there are no additional terms agreed upon, nothing else is owed by either the landlord or the tenant. It should at the very minimum include the below:
1) The lease dates (commencement and expiration)
2) The date when rent is due
3) The amount of rent
4) Any deposit amounts
5) If any modifications have been made to the lease
6) If additional agreements have been made, a list of what those agreements are
7) That no party to the lease is currently in default
Follow the Lease Conditions
Read the lease thoroughly, you may not love the terms of the current lease, but you are bound legally to abide by the lease until the date of expiration. At this point, you will have the chance to either renew and sign a new lease with existing tenants or give the proper legal notice that you will be ending their tenancy with you. If you decide to start over with a new tenant at the end of their lease, you will want to give yourself plenty of time to market the property.
Set up your own criteria for picking out a new tenant. Complete a rental survey for the area so you can determine what rent amount you will be requiring going forward.
If you find that your rents are below market, there are several items to consider.
1) Will you lose tenants if you raise too much?
2) How much can you legally raise them
3) Should you offer some sort of concession ie: accent wall or an upgraded appliance?
4) How long will it take to release if you do lose your tenant
5) How much will it cost to make the unit ready to relet if you lose the tenant
Lastly, keep in mind that not all of these tips will apply to everyone, be aware of any local ordinances that may affect what you can do when inheriting a tenant, and don’t forget, to introduce yourself!