05 Nov You Bought a Tenant-Occupied Property But Know Nothing About Property Management
Uh oh. But not uncommon.
Let me start out by saying that managing your own properties starting out is the way to go.
Because you must know the laws and what you can and can’t do as a landlord. Perhaps you have no interest in managing the properties yourself and plan to immediately hire a management company. *Warning* – if you don’t understand property management, you won’t know how to hire a property management company or if they’re doing a good job. I’m quite confident when I say that most property management companies are not good.
Now, to the problem at hand – There’s a Tenant in Your Property!
1. When you bought the property, you should have received the tenant deposits and contracts from the previous owner. If you didn’t, you started out wrong. If the owner says they did not have contracts or deposits with the tenant but the tenant says they had a contract with the previous owner, ask the tenant for copies of the contract they have. If they also can’t produce a contract, there is nothing binding you to any previous terms.
2. Hopefully you received the tenant deposits because, when they move out, you want something to cover the repairs you will need to do, plus, you’ll be responsible to refund any deposit they paid that is not used for unpaid rent or damages (even if they paid it to the previous owner who did not pass it on to you).
3. You are legally bound to uphold any prior contract and terms that the tenants have (again, providing you have a copy of these agreements). Consumer protection laws protect the tenant and bind you to their previous agreements until those agreements expire.
4. If there is no contract, send all tenants your own new contracts immediately. They are allowed to sign or move. You will then be managing your property according to your terms.
5. Owning a property and managing tenants are two very different businesses. You must learn property management if you’re going to have tenants. I wrote a book – The Essential Handbook for Landlords – available on Amazon, which is a great starting point.
You own the property – you’re the one in charge. You need good contracts and it’s essential that you know your local laws and how to manage tenants.
6. When you do decide to hire a property management (PM) company, know that they manage based on your paperwork and your rules. I owned a PM company for years and most owners came in with their own previously-signed contracts and rules. Some allowed pets – some didn’t; some allowed smoking – some didn’t, etc., etc. We enforced the owners’ rules. What you do with your property is up to you – the PM company enforces your rules (if the company is any good… ).
Managing properties and/or tenants all goes back to the contracts. And your local laws. Every state is different. Know your laws.
Additionally, owning rental properties is a business. When any tenant is “bad” including behind in payments, start eviction IMMEDIATELY. I listen compassionately to their reasons, but the rules are the rules and don’t bend them for any because, if you give in to one, you must give in to all (consumer protection laws, again).
Have you ever bought a property with a tenant already in place?
My name is Karen Rittenhouse and I’ve been investing in real estate full time since 2004. We currently buy about 60 houses per year, 80 percent of which we wholesale. Our current goal is to use that income to pay off all of our hold properties.