Just bought your first rental property? Congratulations, and welcome to the world of real estate! Did it come with tenants in place? Even better because now you don’t have to start from scratch, and you also get instant cash flow.
Although tenants are the cornerstone of the rental property world, inherited tenants can be risky, mainly because you know nothing about them. You have no idea whether the previous landlord conducted proper tenant screening, and you’re also worried about how they’ll respond to management changes. But we got you — here are tips to help you handle inherited tenants.
Review the Lease
Simply because you’ve taken over the property doesn’t mean the existing renter-landlord lease agreement has expired. It is tied to the property, and the terms are still as valid as they were before you assumed ownership.
Therefore, before you close on that renter-occupied property you saw, make sure you review the existing lease. Check out the lease contract of each tenant to see whether it’s a monthly tenancy agreement or a lease.
This is especially essential because it’ll help you know whether it’s possible to make rent changes. It’ll also help you determine whether that property is worth the investment. For instance, if the rent is too low and the remaining lease period is still long, you’ll have to wait until the current lease expires to make changes. So, if you feel like you’re not up to the task, it’d be easier to back out at this stage.
Review the Tenancy
If the lease looks perfect to you, then the next thing to do is review the tenancy. Check into every tenant to see what they are like. This is essential because once you close, they’ll now be your tenant, and as such, you want to cultivate a good relationship. Consider factors such as rent or lease payment. For instance, do they pay on time or wait until you knock on their door? If they don’t, then chances are they won’t pay you on time either, which often leads to legal problems.
If you don’t have the time and energy to deal with such tenants, it would be a good idea to review other property investment options. Note, the current landlord may not give you an accurate picture of each tenant as they are only looking to close and be merry on their way. In that breath, it would be advisable to conduct your tenant screening discreetly.
Be Easy
When you invest in a property, you want to reap as many profits as you can from it. However, remember, just like you, inherited tenants know nothing about you. Some of them will be wondering whether you’ll going to raise the rent. Others will be worried about the changes you’ll bring. For instance, will you start conducting seasonal inspections?
The uncertainty brought about by your management might cause even the best tenants in that property to think of moving out. This is the last thing you need. Therefore, if you decide to close on the sale, don’t start making changes immediately. Ensure you understand the tenants’ rights. Introduce yourself to the tenants by sending letters or emails. Let them know you’ll be taking over the ownership of the property and also any improvement plans or changes you plan on implementing. This way, the transition will be easy for them as well.
Using these tips will help you handle the situation with care and make a smooth transition for the tenants. But what will be even more beneficial on your part is tenant screening. You will learn more about the inherited tenants without them even knowing you did so. This way, you can determine who the bad tenants are, and come up with ways to eliminate them without hurting their feelings.
