Managing Your New Investment Means Managing Your New Tenants
The Real Link between money spent on investment property and the return on that investment is the tenants who occupy the property. The property was purchased because it was income producing property. Property that’s already occupied has the greatest potential to be profitable. Keeping the current tenants is important. There are basic steps that new property owners must take to properly manage existing tenants in newly acquired investment property.
As the new property owner, you must learn who the tenants are and the terms of their lease. You can learn a lot about the property by reviewing the lease agreements. Just as important as it is for owners to know who the tenants are, the tenants need to know who the new owner is and what to expect.
Both the property owner and the tenants have an investment in the property. The property owner expects to receive an income. The tenants’ vested interest involves the enjoyment and security they receive from renting the property. The new property owner has a legal obligation to protect the tenants’ investment by honoring the terms of their lease or rental agreement. The same thing applies to contractors, vendors, or other professionals who are contracted to provide a service regarding the property.
Tenant Real Link Lease Agreements
The first thing on your agenda should be conducting a review of every tenant’s lease agreement. You may discover that some tenants do not have a written lease or they may not be paying market rate. You will have to decide whether or not to renew the lease or raise the rent. Knowing what is in the lease is a major factor in the asking price negotiations. Because it takes time to find new tenants, the leases should be staggered. If all of the leases expire at the same time, it will be like purchasing property without any rental income.
You should expect tenants to be nervous if property they are renting is sold. They will be afraid of things changing. The tenants will not know what to expect until the new owner meets with them to assure them that there will be no changes to the terms of their lease agreement. Some tenants may prematurely decide to move out of fear. Therefore, the sooner the communication begins between the new property owner and the tenants, the better it will be for both parties. A letter from the new property owner is the best way to make that introduction, followed up with a personal visit.
The letter should address the following:
- Name and address of the new owner;
- Contact information;
- A statement of the intent to honor the existing lease;
- The address to send the new payment.