by Theresa Bradley-Banta
One of the things I love about investing in residential real estate is the opportunity to meet and work with a variety of people. This includes my tenants.
What if you inherent tenants? What if you have tenants that have not met your personal screening criteria and are virtual strangers?
When you first take over a property with tenants already in residence it’s difficult to know which tenants to keep. And bear in mind, all of your tenants have rights under their current leases. You can’t just waltz in and evict some tenants and raise the rents on others.
These tips will help you get started on the right foot. . .
How to Take Over a Property With Tenants
Get Copies of Tenant Leases
When you take over a property with tenants it’s likely that each resident will have a signed lease. Make note that not all leases will be current.
Your due diligence during the purchase phase (before you close) should include a request for copies of all leases and rental applications. Also request copies of:
- The most recent financial statements and credit information and reports, if any, on any tenant and of any guarantors of any leases or rents
- Any executed letters of intent with prospective tenants, including lease concessions
- Leasing status reports from the leasing broker, including pending rental applications
- Leases for all subsidized tenants and documents relating to any inspections by government agencies
Note: It’s also a good idea to request copies of historical rent delinquency reports.
What if There Are No Tenant Leases?
When no leases are available, request that the Seller’s tenants sign estoppel certificates confirming the following lease information:
- Lease start and termination date
- All modifications or amendments that have been made
- Amount of advance rentals paid and rent concessions given, if any
- Deposit paid to Seller
- Any existing defaults
An estoppel certificate will prevent a tenant from later challenging the facts of their tenancy.
And if each tenant has a lease? It’s your right to request that each tenant sign an estoppel certificate.
Meet Every Tenant in Your Property
When you first take over a property either you or your property manager should take the time to meet and greet the leaseholder for every rental unit in your property.
Don’t be tempted to hold an open house or barbeque; it’s important that you visit each resident in his or her place of residence. Take goods notes about your first impressions of the resident and the condition of their rental unit.
Tenant Information Document
It’s always a good idea to have each tenant complete a Tenant Information Document that includes:
- Tenant contact information (include emergency contact)
- Spouse or co-tenant contact information
- Description of pets and deposit paid, if any
- Auto make, model and license number
- Driver’s license number and social security number
- Place of work and employer contact information
- Income from employment and all other sources of income
- Rent payment made upon signing of lease
- Last month’s rent paid in advance, if any
- Confirmation that rent is current
- Amount of rental deposit, if any (include all refundable deposits)
- Copy of current lease
- Verification of ownership of all furnishings (drapes, appliances, etc.)
Even if you’ve already received copies of the tenant’s rental application, it’s a good idea to have each tenant complete an updated tenant information document. You can rightly tell them it is for their benefit too. It allows you as the new owner to honor their legal rights.
This is a good opportunity for you or your property management company to start knocking on doors. Rather than post or mail each welcome letter why not hand deliver it?
Good tenant relations start with you and your management team.
This is your opportunity to put your tenant’s mind at ease. They’ve been wondering about you since the day you closed on the deal. They will be naturally fearful about your intentions and they are definitely wondering what kind of landlord you’ll be.
Include the following in your welcome letter:
- A positive comment about good working relationships
- A reminder of when rent is due, related late fees and fees for services and amenities (such as monthly parking or storage fees)
- Contact information for property manager and leasing agents
- Property rules and regulations (these should also be posted)
- Information on rewards programs such as new tenant referrals
- Your system for handling maintenance requests
- The Tenant Information Document
Let your tenants know you will be scheduling a walk-through in the next couple of weeks. Inform them that you’ll be reviewing rental leases for current status and lease renewal anniversaries.
Maintenance: Fix One Thing (to start)
During your scheduled walk-through don’t ask your new tenant what’s wrong with their rental unit. You might end up with a list that includes the mundane to a laundry list covering the tenant’s ‘wish list.’
If your tenant presents a long ‘fix-it list,’ and you do not immediately make repairs, you could end up looking like the landlord who ignores requests and refuses to fix things promptly.
Instead, ask your tenant, “What is the one thing you would like us to address immediately?” Then address it. It’s a win-win for all. Now you’re the new landlord who is responsive to tenant’s requests.
When you set the right expectations you’ve allowed your maintenance team the time they need to do their job.
Offer Services and Amenities
You might be surprised at how many owners overlook additional sources of income.
Can you charge for amenities such as parking, storage, recycling or business/entertainment centers? Can you install vending machines in your common areas? Your new tenants will be thrilled to know you’ll be introducing new services and amenities.
Introduce rewards programs such as new resident referral bonuses or gift certificates for each tenant who pays rent on time for the next 12 months. Be creative.
It Goes Without Saying (but I’ll say it anyway)
It’s your job to know and comply with local and state landlord-tenant laws. If you don’t have time to brush up on the rules that govern residential real estate be sure you’ve retained an attorney who specializes in landlord-tenant law.
Make a Great First Impression
When you take over a property with tenants you will encounter challenges. You will automatically inherit both the ‘good tenants’ and the ‘bad tenants.’ When you begin your relationship with your tenants by presenting a positive, proactive attitude you might just turn those ‘bad tenants’ into good ones.
Who knows what the previous management was like?