Inheriting tenants when you first purchase a rental property.
What's going on guys this is Matt Faircloth. Thank you for watching
Mentorship Monday. I appreciate you guys. Today's question comes from Hugh and Hugh
didn't say where he's from, that's okay. Hugh is from somewhere. Hugh bought himself a triplex.
It's actually the day he sent this, which is in January, it was when he bought the triplex. He
said, "I bought the triplex today." So high five Hugh for buying your first triplex.
So he's got some situations going on. He's got tenants that are paying cash. The property is
fully rented by the same tenants for the past five years. Interesting. So today's conversation
is about inheriting tenants that perhaps have different arrangements than what you would want.
So this is what he's got. It just makes sense for me to read all this to you. "Tenants were paying
below-market rent with cash only," let's get back to that. "They're not acclimated to English
completely and they possess a communication hurdle." We can work around that. "The property
was built back in the days when lead-based paint was prevalent." Well before 1976, I think that is.
"And the lead paint disclosure says unknown." So we've talked about lead-based paint before on
the YouTube channel. We'll just address this one right now. You don't know, because unless you've
had the property tested, it is unknown. As long as there is a lead-based paint disclosure signed,
in most States, that's enough to cover you. Now, if the tenant does happen to have their
kids ingest lead-based paint, you could be subject to liability issue. Most of the time
your insurance company is going to pick that up. And in some states are going to require you to
remediate the unit. But with regards to covering you from straight-up negligence, if they sign
that disclosure, then you should be okay. Now, if you want to encapsulate the lead-based
paint or do more about it in the future, you can go ahead and do that. But the
lead-based paint disclosure, if you just checked unknown and you didn't know that
there's lead-based paint because you haven't had it tested and you don't have data that
there is lead-based paint, then you're okay. "There are children living in the premises." I
get that's probably why you're bringing that up. If you're concerned about children in general,
it's not something you can really do anything about. People are entitled to have your kids
live with them so that is what it is. You're looking to raise rents to match the market
given by giving out a notice and you're going to decrease liabilities, okay? Lead-based paint,
make sure you're in line with local codes on the lead-based paint stuff for liability and long-term
maybe look at either remediating lead-based paint, removing it altogether or just encapsulating it
in the walls are doing things that you can do to remove the risk of lead-based paint. It's a
lot you can do around that. You can, maybe we can have a separate conversation just about lead-based
paint on the channel, we can do that. Other issues you can do to raise rents. It's
if they're on a lease, you can't just go and say, "Okay, your rent's now $200 more or whatever."
You've got to abide a rent control laws, and you've got to abide by the lease. If the tenants
are paying with cash you can definitely stop them from doing that. You can say I no longer accept
cash and require them to pay you by ACH, by bank deposit, by a check. There are services that you
can take the money directly out of their checking account if they give you authorization to do that,
that's the way it works. We're going with all of our rentals is just electronic payments
does even services, it's a company called PayLease I believe. And we use AppFolio.
AppFolio allows tenants to walk into places like 7-Eleven and they can pay their rent in
cash at 7-Eleven through AppFolio. But PayLease is another service that tenants can walk into
check-cashing places and stuff like that. Give them this little ID card that you give them and
pay their rent in cash at the check-cashing place and it gets wired to you. So those are
two services you can look into if you guys have a lot of tenants paying cash to get away from that.
That said we haven't gotten 100% away from it either. We're working on getting away from that
at our company just because I don't want cash floating around. But we're, we're almost off
and hopefully to be 100% off of that this year. The whole English thing, it is what it is Hugh. I
think that we accommodate a lot of our tenants, we work with translators. There's Google Translator.
We'll give them information in writing, we'll write it up, translate it and give it to them.
Sometimes it's hard to carry on a conversation. I also try and find someone who's fluent in the
language that they speak. We have a lot of tenants that don't speak English or speak little bit of
English so we find means to communicate with them that's not something you can hold them accountable
to. I think that's it. And just, if you're not on a written lease see what you can do to get them
on a written lease contract and if you're not, then you might be able to get rents up there.
The bottom line guys, when you guys take on rental properties that are managed by other people,
when you buy them, you're going to have issues. You're going to have to onboard the tenants and
get the tenants on to your sheet of music that you like to sing off of so that could be your
lease contract. If they don't have security deposits. You can require that they post a
security deposit and maybe let them pay it over time to get it, to pay it up. Rental standards
with regards to conditions of the units, payment time, their payment strategies. They could say,
"Well, my prior landlord, let me pay every week." Well, if you don't want to live by that,
then you can require the rent to be due on the first if it's written up in the lease,
in your lease, the way that you want it to be. So the bottom line, if there is a lease that they
have, you have to abide by that and you can negotiate changes, but if there's not a lease,
then it's kind of whatever you want to change. So I know I'm all over the place
in this but Hugh had a lot of different questions here, so that's it Hugh, good
luck and congratulations on your first triplex. If you guys have Mentorship Monday questions
fire them off to helpme@derosagroup.com. Don't forget to like and subscribe, like this video
and subscribe to this channel. Thank you guys for watching and have a great and profitable week.