24 Jan Should I Evict the Old Tenants at Closing
Question: Should I Evict the Old Tenants at Closing
Should I Evict the Old Tenants at Closing? I am considering the purchase of a five family apartment building. None of the tenants have leases and all but one have been there 4 years plus. The current owner bought it a little over three decades ago and has done the bare minimum to keep it rented.
At inspection all but one unit were ok. It was completely trashed by the resident.
The property cash-flows but every unit needs new doors and windows. One unit needs major renovation due to the tenant.
- Should I evict the old tenants at closing, do the renovations and start fresh?
- Buy the place, raise all the rents to market rates (they are well below, but so is the condition of the apartments) and wait for them all to move out. Renovate and install new tenants.
- Evict only the filthy deadbeat?
Do Not Evict the Good Tenants
Good tenants are a treasure; keep them as long as you can.
Ten minutes after closing give a 30 day notice and start the process of removing the pig from their sty.
Send an introductory letter to every resident and let them know who you are, where and how rents are to be paid, planned renovations to their unit and that you would like to meet with them personally.
Have a Plan
Create a document outlining your planned renovations. Calculate the new rent for the renovated units. Determine an incremental rent increase plan for all remaining residents. Each increase should include the planned upgrades and renovations to each unit. Example: Within 90 days of the first rent increase all windows will be replaced. Doors and locks changed out after the second rent increase etc. Having a plan will let your resident(s) see the additional value you are providing them.
Set your Plan in Motion
Within 30 days of closing schedule appointments and meet with each of the residents you plan on keeping. At that meeting Introduce yourself and show them your vision. Sell them on staying!
Before the last day of the month following meeting with your residents give them a 30 day notice of their first incremental rent increase. You could even serve the notice when meeting with the residents. Always check with your attorney and all local ordinances to determine if a longer period of time in needed for a rent increase.
Serve Notice
Serve your residents anywhere between the first and the last day of the month. The 30 days starts tolling or starts being counted on the first day of the “following” month. Never wait to serve a 30 Day notice on the fist of the month. The days will not start counting until the 1st of the following month.
Local Ordinances may very. If you don’t have a good attorney give me a call.
New Leases
Offer every resident a new lease at the planned rent. If they decline, let them remain in the unit at the first stage of the incremental rent increase. Let them know that signing a lease puts them on the priority track for upgrades.
First Renovation
After the pig sty is renovated show it to every one of your current residents who did not choose a new lease. Tell them what the new planned rent is and offer it to each of them at the new planned rent. You may have a unit switcher, but probably not. This is a symbolic gesture of your good will but also lets them know you are serious in your intentions.
Attrition
After the first incremental rent increase you may lose a tenant. Now renovate their unit. Once it is rented, before the last day of that month give the second 30 day notice of your next incremental rent increase. Just like shampoo lather rinse repeat until all units are up to your planned rental rate.
Maintain Cash Flow
Your goal is to stagger the move outs to avoid 100% vacancy. Vacancy can lead to vandalism, theft of copper and other issues best avoided. Vacancy really impacts positive cash flow and may slow down your planned renovations due to cash shortage.
Check out our course on Tenant Screening and Lease Options.
Good Luck and Good Investing
George Skidis
President and Founder
To Join Illinois REIA Click Here
No Comments