Inform inherited tenants about change of ownership


This week’s question comes from Rhette on the Real Estate Rookie Facebook Group. Rhett asks: How do you inform one inherited tenant change of ownership after a property has been closed?

When you inherit a tenant, you often inherit a lease as well, so it’s important to know exactly what the tenant pays for the rent, their bail, and their rental terms during your due diligence phase. If you want to notify your new tenants of a change of ownership, make sure you do it professionally so that they can reach you on your work phone during the hours you set.

If you’d like Ashley and Tony to answer a real estate question, you can post on the Real Estate Rookie Facebook group! Or give us a call on the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie Episode 110. My name is Ashley Care and I am here with Tony Robinson. And today is a rookie answer. We pulled a question from Facebook for you guys that we will discuss. Tony, what’s today’s question?

Toni:
Good. So today’s question is, and I have to see who made it. It’s from Rhetts Miller, Rhetts posted on Real Estate Rookie Facebook group. How do you notify an inherited tenant of a change of ownership after a property is closed? So all of my long-term rentals were empty or I bought them empty, then we rehabilitated them. So I never had to deal with inheriting someone else’s tenants. Ashley, the queen of property management, shares her experience with us. What do you think about this

Ashley:
I’m not sure if I actually have that title, but between you and me, I’ll take it. The first thing that can happen is that an investor or someone selling a property may not want tenants to know that they are selling. I have a property under contract right now and the owner doesn’t want tenants to know about it because they fear they’ll simply stop paying rent or I don’t know what bad things they think are going to happen, but they want not that they know.
But the first thing you should try to negotiate with the seller so that you can send avoidance agreements to the tenants. And this would be before you got locked on the property. So this could be done during your due diligence phase where you send them a piece of paper and they basically give them their name and rental terms, e.g. B. What do you pay for the rent? Do you have pets? When does your lease expire? Do they do snow removal and landscaping or is that not included? So there are several things you might want to ask on this form, but basically you’re reviewing the lease and then asking about other terms as well. What additional costs do you pay? All you have to do is check that what the landlord says matches what the renter says.
And another big one is the deposit. Make sure they are both on the same page for the deposit. It definitely helps if you have copies of the leases so you can make sure what they say is true because basically you are really leaving the lease and not really what anyone said but often this mom and dad Papa landlord, you don’t have any leases. It can only be an oral agreement or no detail at all in the rental agreement. So this is a good time to send those stubble agreements out so you’re on the same page.
And then, when you buy the property, you want to at least let them know the day of closure, when you took ownership of the property, and this is best written down. So that could be that you could drop these off at the doors. You could mail them out so they arrive on the day you close. But I think a great way is to actually stick it on your door and hand it off. So they know they’ll get a certified mail or something like that and then send another copy. If it’s a property that has common areas, you can post them like a notice. Here is the new owner information. How to contact them. This is what you do for maintenance, various things like this. But I love to write everything in writing. I’m pretty sure if you try to call the other landlord the other landlord won’t answer because they’re not the landlord. They don’t have to or will not be deal with this property and they will just share your information.
One thing you may not want what happened to me is that a renter did not get my information correctly. And the owner gave them my personal cell phone number and I always used a google voice number. So there was a little mix-up that can be avoided by providing your details on the closure as soon as you take over the property. So what else am I missing that you want to know, Tony?

Toni:
Yes, no, there is so much good information out there. So what happens to this Esstoppel agreement if there is no lease, right? Let’s say it’s a great mom and pop, like you said, it’s all verbal. If you go out there and try to fill out that diner agreement, what if they act like we never talked about these things? Can you force this tenant into a new lease since they haven’t signed one or something like that and this will likely vary from state to state but at least where you are, what is the process if there is no lease?

Ashley:
Yes. So if there is no lease and they are taken into account from month to month, however, you still have to cancel them if you want to increase the rent. So I don’t know what it is right away, but in New York state it’s kind of like you’ve lived there for less than a year, you give 30 day notice. If you have lived there for less than two years, give 60 days’ notice. And I think beyond that, I think there is a 90 day notice maybe. So you would have to stick to such rules. So on the day of closure, you could also negotiate in your contract with the seller to notify tenants, so that in New York state it takes 30 to 90 days to close a property anyway. So you can always negotiate that you cancel this rent increase in order to cover part of this period.

Toni:
And then do you actually like to shake hands and introduce yourself when buying a new property? Or is it just like sending them the information, the Esstoppel contract or the new rental contracts?

Ashley:
Yes, I just kept emailing. At the very beginning, when I only had a few properties, I was working on the properties there and I was there for the demonstrations and things and they would know I was the owner, but otherwise, after that, I was more of a try to be seen as a property manager than as an owner. And I was sending things in the mail trying to limit enough time that I didn’t have to go to the property as often.

Toni:
Ever struggled to enforce new leases with some of the inherited tenants?

Ashley:
No not true. Because what I’m going to do was this woman who had lived in her apartment for 30 years. It was a two bedroom, one bath. Everyone else was paying $ 500 a month, which was still below the market. And she was paying $ 300 a month. So what I did to her was a gradual increase. I think over six months we raised it to 425 because she was the only one paying for her own water but to somehow make up for it. So I’m trying to work with people to do it that way instead of just saying, oh, next month your rent will go up to $ 525. And then I also make comparisons. I will show them that I am actually raising their rent to the market rent. So I’ll write a letter stating something similar in the area. So this apartment is listed online for this rental. It’s the same as yours, two bedrooms, one bathroom. The same number of upgrades. And this one costs 800 a month and I still offer you 750 or something like that. So I try to show them that I’m not being unfair. I am not rude. It’s just that they got a lot for so long. And I’m just bringing it up to market rents.

Toni:
Last question. Do you often have tenants who quit when the rent increases or do you say 50/50?

Ashley:
I really don’t have anyone who’s ever quit for a rent increase because I’m trying to make it so fair where it’s not that much. But no, I haven’t dealt with that.

Toni:
Man, you made it sound easy.

Ashley:
I think what is good.

Toni:
You made it sound super easy.

Ashley:
I mean, I’ve still had vacancies where I get people to leave, but never because of a rent increase I guess.

Toni:
I would just think that maybe that’s part of Rhetts’ logic here too: Hey, if I buy here and then try to raise the rent, will I have four empty units? But it sounds like hopefully it won’t be too much of a problem as long as he does it in some kind of fair and consistent way.

Ashley:
Yes. And it also takes time for people to find an apartment. So it probably wouldn’t be instant because they have to give you notice of a resignation and the likelihood that they will all leave. But you can also do a complete solution with them and say I want to increase the rent. And maybe there are a couple of things they would like to do about the property that you can show off like, okay I’ll fix this for you, make it beautiful and your rent will be that high. So definitely communicate and listen to your tenants, just like we always talk to a seller, why are they selling? Likewise with a tenant. Why should they move? Why do you want to stay? Things like that, especially your first real estate.

Toni:
Yes. Well love it. Ash, I feel like we met Rhett’s question or not, I haven’t done any heavy exercise in this episode, but I feel like-

Ashley:
But you asked great questions.

Toni:
I like Rhetts’ question so much, so I don’t know. Any final thoughts?

Ashley:
No I do not think so. Thank you for interviewing me for this episode.

Toni:
I’m making my best Oprah impression today.

Ashley:
You get a card, you get a card.
Well, thank you for listening to today’s rookie answer. I’m Ashley at Wealth of Rentals and he’s Tony at Tony Jay Robinson. And we can’t wait to see you guys in New Orleans at the BiggerPockets Real Estate Conference.



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