We have an opportunity to buy a well priced 2 bed unit in a growing suburb not far from a capital city. Everything stacks up and it's in good condition in a block of 6 units. Problem is the tenant is currently paying $25 a week less rent than all the other units in the block – the reason why – the longterm tenant is an elderly (late 80s) invalid pensioner….so the previous owners have sympathised and kept the rent low for him.
I know if we buy it we are well within our rights to increase the rent or take vacant posession – particularly when we could get $190/week plus in rent in a second.
The problem is I want to sleep well at night too and the thought of turfing an old guy out of his home or making it unaffordable for him tugs my (usually un-tugable) heart strings.
Given the old buggar could probably live for another 10 years – I'm not keen to wear the expense either…
What would you do???
I guess I would look at how the numbers stack up, based on the current renal agreement. Do they look good? Obtaining the extra rent could be a bonus down the track, but that depends on how long you expect to hold the property for?
You could also try to negotiate a slight increase of say $10 per week, as part of the purchase deal?
But at the end of the day, the numbers need to work…… but at the same time, you need balance $'s v morals….
maybe put in a clause that offer subject to agreement to lease with current tenant.. go & have a chat with him if you can… who knows… you may keep rent as is for him or he may offer an extra couple of bucks to remain there without the hassle of moving or he may even want to move out anyway to stay with rellies… sounds like you have a reasonable moral compass but the next bloke may not… the numbers still have to stack up to make it viable of course, but life is not about who dies with the most houses…!!! How much will $25 /wk cost after tax?? What is the potential for Capital Gain, it may be worth losing a bit to gain a bit more???… if it really is not do-able then walk away with a clear conscience not that you should be guilty anyway. why not negotiate hard so the numbers do stack up…. best wishes Mackar
I would defiantely go and talk to the tenant and see where he is headed in the future,.as he may be planning to go with family soon you never know,or if encouraged that the rent needs to go up due to yr new expenses with the bank(explaining you are paying more for the property than the current owner, due to the market increase so you need more rent to pay for it),ie not yr fault),he may look for other (probably quite acceptable for him) options for living .
Or work something out with the tenant that he pays an extra $10 to $15 per week ,and manage the property yrself saving on agents commission but explain to the tennat he needs to look aftre the property aotherwise the increase will have to cut in fully. or:
just bless the guy taking this off yr profit for the next few years hes alive if its on yr heart to go this way
.Once talking to the seller and the tennant you will be able to weigh it all up ,including what price you can negotiate the deal for,you will know which way to go.Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Thanks everyone for your suggestions, it's really appreciated. We'll see how we go, but I know in my heart we don't want to make an elderly gent's twilight years stressful – hell if he has no family we might even adopt him!
do your sums ,a few weeks vacant every year may be more than the hit you take on a long term tennant who pays every week , i go for growth so tennants who are happy to stay put suit me fine .i know its not what you see in books but the reality for me is changing tennants regularly is a hassle an always costs something
cheers and good luckHard one!! I regularly keep my rents below the market. All my tenants are paying $20 to $30 below market rate. However they are all great tenants some of whom have been with me for over 5 years. One tenant has painted quite a bit of the house – I offered to pay for the paint but she wouldn't accept it. She has also bought and put in her own blinds.
In the long term, I have been happy with my strategy.
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