Investment property - expiring leases

[ownsmany]

My offer was accepted for the duplex. Both units are currently rented, below
what they should be. One lease expires the day of closing, and the other expires a few months later. I'd like to do weekly rentals in the summer and have winter tenants.
Question - at expiration date I'd like to redo the leases at a substanial increase and only do the lease till end of Spring. Can I do that - since the leases will be expired - or is there some regulation that it can only be increased so much? Property is in NJ.

 

[am1]

It may be easier to just go month to month at the current rate. If your current tenants leave would their be demand for people to stay just till the spring?

Are you willing to fix them up now (if needed) for new tenants and possibly have to fix them up again in the spring before the higher paying tenants move in.

 

[vacationhopeful]

It is called UNconciousable RENT INCREASES and NOT ALLOWED under NJ LAW.

8-10% is about the MAXIMUM yearly increase. Also, you can not terminate a tenancy just because YOU want to make MORE money. These laws are outside of a local Rent Control statue.

There are specific notices and TIME FRAMEs required under NJ law to take a unit off the market for upgrades or can of use (apts to condos, etc).

Do not try and say, you are going to personally use the unit during this summer and boot the tenants to lease only to weekly clients ... you will NOT like the triple damages awarded to the tenants plus moving costs and you paying their increased rents for the next 3 years in their NEW place and paying their legal fees.

NJ is NOT like PA regarding rental law. There are 30, 60, 90, 1 year, 2 year, and 3 year NOTICES to the tenants which may/will be required. If these tenants pay on the 1st of the month (Dec) and you send a notice out on the 3rd (certified mail with returned receipt & regular mail) your notice is NOT effective til Feb 1st).

Get a local shore lawyer who is a regular with the eviction court in the county your property is. Most apartment complexes use a single law office or two; they will be cheaper, know the judge, and will know the law. In that order.

You can require the current owner to notify the tenants that you will want personal possession & use ... then you will be camped out there for at least 2 years or MORE before you can do weekly rentals.

No, I am NOT a lawyer, but I spend beaucoup time in NJ eviction court and have read the NJ brouchure on tenants' rights for NJ.

Seasonal rentals verses low rent yearly rentals --- you also get into EMERGENCY stay issues. 6 MONTH stays can be granted by the JUDGE even after you get an eviction order and after the warrent of removal IN NEW JERSEY .. they just have to pay your the OLD rent on time.

So ... possible time line as an example .... send the notice of rent increase at 9.5%, good for Feb 1st. File eviction on Feb 5th (these on not disable or retired persons? right?), get a court hearing on Mar 15th, tenant applies for a change of date (allowed w/o reason once), new date is now April 1st or 8th or 15th --- depends on how county assigns the new date. Go to court aand WIN (that would be too easy), wait 6-7 days to file the Warrent Of Removal (weekends & holidays DO NOT count), service by county Special Officier, giving them 3 days to get out, YOU schedule lockout with sheriff's officier, tenant files emergency Stay Hearing (another 2 weeks), tenant postpones once (another 2 weeks), get stay hearing in front of Judge, GRANTS a 6 months emergency stay request (almost ALWAYS granted) ...

See you next year at this time ....

Many years of experience ... in NJ rentals ....

 

[vacationhopeful]

PS --- some people PAY tenants to vacate. And I will not be offended if you don't believe me. Your shore lawyer will most likely tell you the same.

 

[ronparise]

I dont know N.J rental rules (you already have your expert for that: Linda) but I do have years of experience as an owner and as an agent in other states I used to spend 3 or 4 days a month in Baltimore Cities Rent Court. My experience is when you and your tenant cant reach an agreement and you give it to the court to decide...neither party is happy with the outcome. (and my tenants knew the law and the system better than either I or my lawyer did)

My advice is a "bird in the hand is worth two in the bush". A paying,non complaining tenant is worth their weight in gold. How much is a new tenant likely to pay? and how long will it take you to convert to a new business model? (monthly pay/annual lease to weekly pay/vacation rental). And how long will that conversion take? Time is money.

I would raise the rent a modest amount, spend some money right away to improve the place for your tenant and dont make any changes to the business model, until the tenants move.

 

[ownsmany]

Thank you.

Tuggers are a wealth of information!!! I think I will have to rethink my business model. I have 2 other investment properties / one weekly - then winter tenant and a second with a yearly tenant. The weekly rental does MUCH better, but my yearly tenant is worth their weight in gold (no problems,compliants, rent always on time, etc).

For investment / financial returns I bid on the property thinking of weekly rentals. Guess that won't happen until the current tenants decide to move out. My plans of adding another bath / central air, etc will have to wait til I convert to weekly rentals. Will do other improvements first.

Thanks for the advise and hopefully keeping me away from a court situation with tenants. Think I'll do the modest increase suggested.

I can go from a yearly lease to a shorter time frame monthly lease if I want to, correct?

 

[ampaholic]

Wow, don't buy property in NJ for sure is my new motto.

Once you convert to the weeks model, can't you just advertise a discount to lease all the winter weeks by one tenant.

Say if you lease all 18 (20, 14 etc.) winter weeks you get a 50% (20%, 40%, 60% etc.) discount?

Keeps it in the weeks model.

I use the discount trick to "encourage" on time payment - as in "rent is $550, however if paid before it is due, you get a 10% ($55) discount" - and I get the $495 I would otherwise ask. It works out just like $495 rent and a late fee of $55, believe it or not I usually get rent before it is due.

 

[ownsmany]

I do the weeks model in the summer for one of the properties, and then just do a 9 month lease or so on the fall-spring. I have very strong language in the winter rental lease saying it is strictly for those months, with no option of renewal. Even have in there it's rented on a weekly basis in summer. That way (hopefully) the winter tenant couldn't try to stay during the summer at the reduced rate.

The weekly summer / then winter has worked well for me - but I guess not in a circumstance that I'm buying a property with current yearly tenants in it.

Oh well, live and learn . . .

 

[ampaholic]

I do the weeks model in the summer for one of the properties, and then just do a 9 month lease or so on the fall-spring. I have very strong language in the winter rental lease saying it is strictly for those months, with no option of renewal. Even have in there it's rented on a weekly basis in summer. That way (hopefully) the winter tenant couldn't try to stay during the summer at the reduced rate.

I guess I wasn't clear ...

Let's say you want $1000 per week for the summer 14 weeks --- OK?

And you want $600 per week for the 38 winter weeks (approx 9 months) -- OK?

IF you word your lease to read ... "rent is ALWAYS $1000 per week" BUT "If you commit to renting ALL 38 winter weeks during the same winter season you will get a "discount" of $400 per week, and you can pay (in advance) every 4th week unless you are late with a payment - then the discount is not applicable".

You will kill three birds with one rock ...

1. You will automatically have the pricing structure you want built in.

2. You will automatically have the pricing "upgraded" if they decide to stay the summer. (only bad if you are taking far in advance reservations)

3. You will build in a tremendous incentive to pay on time.

Just my $.003 worth (inflation).

 

[easyrider]

One approach would be to send them a letter introducing yourself. In this letter state that the tenants lease will not be renrewed. If they do not move out you will need to evict them.

You will still need to work with the seller as they have the security deposits and rental agreements. If you do not follow the procedure for explanation of the security deposit the tenant could ask for it back.

Since you are the new landlord, you will need the tenants information and they will need yours. Send the tenant a new rental aplication and if you feel they qualify start them out with a new rental agreement.

My experience has been that all of the renters we didn't screen have been a problem. Im not sure I would buy a rented out duplex without screening the tenants first.

 

[vacationhopeful]

NJ law is pro tenant. If the tenant is 'in possession' of the unit, no matter what the lease or your letter to the tenant states, they are in possession. A weekly tenant DOES NOT PAY for utilities. Weekly rentals are furnished and have a housekeeping service. A monthly tenant does not. A seasonal rental does not allow a child to register for school. You must eviction a tenant in possession. A weekly tenant can be thrown to the curb as THIS IS NOT their primary place of residence. ie Motels in NJ do NOT allow (via their management's policy) a guest to stay in a unit for more than 90 (might be 60) days. That establishes RESIDENCY and requires the landlord/motel management to process their removal via eviction court. And remember, these shore towns have perfected occupancy codes and zoning rules.

Your 9 month rental agreement will establish residency in NEW JERSEY in your duplex --- not a transitant rental.

Now you can get around that, IF their employment requires them to LIVE onsite. But you really have to know the law. Springsteen does this to control who lives near his farm/house in North Jersey. You quit or get fired, expect the moving van there before you can blink.

Buying the property is the act which acknowledges your acceptance of the tenant and their terms of occupancy.

 

[vacationhopeful]

... In this letter state that the tenants lease will not be renrewed. If they do not move out you will need to evict them....

Can't do -- must cite a legal reason to not be renewing their lease. ie ... permantently removing the unit from the rental market. LEGAL REASONS: Owner occupanying the unit. Direct member of the family occupanying (mother, child) ... and don't mess with this; the penalty is extremely. I don't have my paperwork for legal reasons with me --- but to convert to condo ownership is like 3 Years Notice to the tenant.

Now, you can alter minor rules; no additional dogs, no dog after current dog dies, certificate of dog behavior , acceptable dogs to YOUR insurance comapny or Liablility insurance of xyz amount to cover their dog. No parking on the grass or backyard (driveway only). Legal occupancy limits (town sets those). But you will get very tired of writing Notices to Cease (with documentation and pictures) and Notices to Quit, filing eviction with a lawyer, and trying to boot them to the curb. NOT FOR A NEWBIE without a very experience lawyer.

Yes, I brought a duplex from an estate with tenants paying 1/2 of the market rent. Took me 5-6 years to bring their rent levels up. One side hired a lawyer after a couple of years and I called their lawyer up to ask if he had graduated from the PepBoy's law school? He had written me a 7 page letter of total BS and he should tell his clients to PAY ME MY MONEY and I would not tell his clients to sue him for malpractice and why. 48 hours later I had my 3 months rent money ... Lawyer's logic ==> figure I would find out IF YOU knew the law; no harm to try. Yep, that is NJ.

 

[funtime]

I guess it is best to think of this as a long term investment. And, how long have the tenants been there? Are they likely to move? If that is a possibility, I would do nothing and just wait them out - no fixups that are not needed etc. Look to some other property (foreclosed townhome in Florida etc) that is not so restricted to purchase and fix up immediately. If you want to make any changesto the rental price and/or agreement, it is clear that you should consult a knowledgable lawyer first before you make any new demands on your tenants. Funtime

 

[Talent312]

Look to some other property (foreclosed townhome in Florida etc) that is not so restricted to purchase and fix up immediately.

The Florida Landlord-Tenant Act is a landlord's dream and a joke on tenants.
Almost every provision effectively says, "unless otherwise agreed in writing."
In a no-lease month-to-month, 15 days notice for no reason at all is good enuff.

 

[easyrider]

Can't do -- must cite a legal reason to not be renewing their lease. ie ... permantently removing the unit from the rental market.

When the terms of the lease expire the tenant is considered a month to month tenant. At this time a landlord can give a 30 day notice of eviction.

When the lease expires the landlord can also change the terms of the lease.

 

[vacationhopeful]

The term in NJ is "Notice to Quit and Vacate" for a rent increase and change of terms in a lease. For example, you can state NO new or replacement pets allow, but you can NOT demand a dog remove if it is on the lease or that the landlord has allowed to be living at the residence for 90 or more days. Now if the dog has biten someone, you can demand immediate removal of "that" dog from the property. If you do not issue a new lease, the terms of the expiring lease remain in effect.

But as for raising the rent 10% every month, it becomes "unconsciousable" after the first raise within a 12 month period. If this is a HUD lease, your rent increase maximum is determined by ther regional FMV (fair market value) of rents as established by HUD. You are NOT allowed to charge "side payments" or to demand that they move. If you fail to perform repairs as stated on the annual inspection, you CAN NOT evict them for failure to pay rent. Instead, you are abated (flush down the toilet) all rents til you make and have inspected the required repairs. If you have Rent Control in the town/city/boro/muncipality, you might be limited to a much lower rent increase. A good legal aid lawyer might be able to reduce that older 10% level to 2 or 3% in the current economic rent values.

So you can demand ANY rent you so dream of, tenant does not pay, you try to evict, you lose due to UNCONSCIOUSABLE rent increase, you pay the LAWYERS fees for tenant, judge might give you $2 per month or can lower the rent, and you just learned what it is to be a landlord in NJ.

You might hear the term, landlord declined to renew my lease --- trust me, there is at least 3+ notices for not complying with a standard lease. Damages, police calls, illegal activities, over-occupancy, habitually late payment of rent, failure to perform terms in the lease (trash, not mowing grass, pets). They got the letter to QUIT and VACATE by a certain date.

NJ was an original colony; tenants would clear land, build shelter, and install fences, while owners where the original land grants from the King of England. They were NOT serfs and hence, the common and written law evolve with far more protections for the tenant to have a home and not to be run off by the property owner. Large grant land owners soon found it better to just sell the ground.

 

[Bee]

I don't know New Jersey laws, but typically a lease is for a stated period of time. When it expires so does all the rights it gives to the tenant and landlord. Typically, the lease is either renewed or the LL and tenant agree to got to a month to month agreement.

I would guess that at lease expiration you have the right to take back the property and the tenant must move. However, if you keep the tenant on a month to month agreement you will have to follow New Jersey's rent control laws.

Also, you should find out if you still have to give notice with a lease and how much notice is required.

Bee

 

[ownsmany]

makes me wish I was buying a vacant property and I wouldn't have to worry about how to get rent up to where it should be - or renting for what time period I want to.

Lots of good advise and suggestions. Think I'll have to consult a lawyer to see the best course of action. Don't want to have problems but don't want to be stuck with sub par rents forever.

 

[ampaholic]

After reading Linda's words about NJ landlord tenant law I would ask the lawyer about incorporating the units as a "private club".

Then you could sell "temporary" memberships instead of renting weeks (it might take some careful wording in ads). These memberships would give the member the right to stay at the "club" subject to rules set by the club's management (you).

Have the lawyer write the rules so they could stay the winter without establishing "residency" - and if they overstay what the rules say they are allowed they are trespassing.

We have a club here called The Spokane Club - members can stay for a fee per night basically indefinitely without creating a landlord tenant relationship.

But, that's here in Washington - ask the lawyer if you can do it in NJ?

as always YMMV

 

[ownsmany]

finally got payment history and appears both have been paying late every month. Figures .

 

[Talent312]

finally got payment history and appears both have been paying late every month. Figures .

Try renting to a family member sometime and see how often they pay on time.
But then, he's my stepson and if we evict him, he'll move in with us...

 

[ownsmany]

Try renting to a family member sometime and see how often they pay on time.
But then, he's my stepson and if we evict him, he'll move in with us...

:rofl: Made me smile.

 

[vacationhopeful]

finally got payment history and appears both have been paying late every month. Figures .

That is material info if you had requested it before signing contracts. You might try to walk, demand the current owners remove them before settlement or lower the price a bunch.

 

[ownsmany]

That is material info if you had requested it before signing contracts. You might try to walk, demand the current owners remove them before settlement or lower the price a bunch.

Yea - I should have gotten it before. We have a very quick settlement - before Christmas. I won't feel right throwing them on the steet that quickly (not that I could anyway). I have an out - that I have to exercise soon if I want to. Starting to find a lot of issues . . . begining to feel like I feel for the lipstick on the pig.

 

[vacationhopeful]

There are always another deal. And these owners can always come back to the table after they correct their problems. And why should YOU bail them out of their problems and mess. WALK.

IMHO.

PS I spent another lovely afternoon in NJ eviction court today. A very long roll call (double in case load for normal) and some very unhappy landlords - one who had not been paid for a year after filing and he filed in January, 2011. Judge told him to refile (a new eviction) as his eviction notice as he was "out of date" for the 30 days of the original warrent of removal now which ran out of the 30 day window of time. And 2 different landlords whose tenants had filed complaints against them for self-help eviction actions (one who will get sued for personal damages).

And NONE of these tenants will be physically evicted til late January or later -- it is called the Christmas effect.

Every new case listed today was filed before the 3rd week of October. Yes, those tenants are getting 4+ FREE MONTHS of RENT. OCT, NOV, DEC, and JAN.