Duplex closes in three weeks. I inherit a tenant with no written lease.

Asking the thing I would've been embarrassed to ask. If there's no written lease, what exactly is she, legally, on day one after you own it? Does the arrangement she had with the old owner follow the building, or does it end at closing? I genuinely don't know and I'd want to before I planned anything else.

@compass, my understanding is that an unwritten arrangement with rent paid monthly generally becomes a month to month tenancy that carries over to the new owner, and the notice you'd need to change the rent or end it varies a lot by state, sixty days in some places and much longer in others. That's the version I'd take to a local attorney for an hour rather than trust me on. @wren, the piece I'd add is that rent control or just cause eviction rules exist in some cities and cover small buildings in some of them, so find out what your municipality does before you decide anything.

Cash with handwritten receipts and no ledger means you have no verified payment history, only the seller's word. That's the part I'd fix first regardless of what you do about the rent.

Get her onto a written agreement and onto a payment method that creates a record before you touch the rent. Two separate conversations, two separate months. If you bundle the paperwork with a 300 increase she'll hear one thing, which is that the new owner arrived and made her life worse. I've watched a friend lose a good long tenant exactly that way and the unit sat for two months.

The 360 you calculated isn't cash flow, it's the number before anything. Take out the 95 for water, 5 percent for vacancy on 2,050, and something honest for maintenance on a building you haven't lived through a winter in, and you're near zero. That's fine for a first property with 15 percent down, and it also means the 300 gap in unit B isn't a nice-to-have. It's most of your margin.

We manage a lot of these and the move that works is a two step. Written month to month at her current 875 in month one, then a modest increase at the first legally available point, 60 or 75 rather than 300, and repeat annually. Long tenants absorb small increases and quit over big ones. Also, when you write the agreement, put the water arrangement in it explicitly, because a one-meter duplex with no written terms is how you end up arguing about a 200 bill in August. Notice requirements for a rent change differ by state, so get yours from your attorney and calendar it.

Underwrite it both ways and see if you still like the deal. At 875 held flat for three years you're at 2,050 gross with basically no cushion. At market on both sides you're at 2,350 and the building works. If the purchase only pencils on the market rent assumption, you're paying today for a rent increase you haven't earned yet, and that's the same mistake people make on bigger multifamily. My question back to you is whether 289,000 was priced off the actual 2,050 or off a broker's pro forma.

Starting from zero myself so I'm mostly reading, but the shoebox of receipts is the detail I'd want cleaned up before closing rather than after. Can you ask the seller to sign something at closing confirming what rent she pays, what deposit he holds and that there's no other agreement? @fathom mentioned estoppel certificates in another thread and it seemed to fit exactly this.

Your lender is going to ask for a lease on unit B to count that income, and a shoebox won't satisfy anyone. Ask your loan officer now, in writing, how they'll treat an unwritten month to month tenancy for qualifying purposes, because some programs will use a market rent appraisal addendum instead and some won't count it at all. Three weeks out is late to discover the income doesn't count.

Nine years in the same unit with no rent increase usually means nine years of nothing being replaced either. Look at the water heater date, the furnace, the toilets, and whether anyone has been inside that unit recently. I've walked into long tenancies where the owner never entered because he didn't want to disturb a good thing, and the deferred maintenance was hiding behind the good behavior.

@sextant asked the right question and I'd stop there until you have the answer. If the price was set off pro forma rents you have room to negotiate in the next three weeks, especially with the vacancy in unit A giving you something concrete to point at. If it was priced off the real 2,050 then you bought fine and the rest of this is an operating decision you can take slowly.

Six months of looking and I've seen three of these, an under-market long tenant is more common than anyone admits in small multifamily. Every seller frames it as a feature. It's really a repricing you inherit, and the cost of it lands on whoever holds the building when the tenant finally leaves. Doesn't mean don't buy. Means put a real number on it and stop calling it goodwill.

Small thing that matters more than it sounds. Set up a way for her to pay that isn't cash before month one, and if she doesn't bank online, be ready to accept a money order and issue a real receipt with a number on it. I've seen a nine year tenancy come apart over a disputed month that nobody could document. Whatever you choose about the rent, the record keeping is the part you control entirely.

Went through this twice before replying. The part I didn't expect is how much of the answer is about paperwork and how little is about the 875. I came in assuming the whole question was what to charge her. Is that generally how it goes with inherited tenants, that you fix the documentation first and the money follows later?

@juniper, mostly yes, because you can't enforce or change terms you can't prove, and a written agreement gives you both something to point at. @wren, one more item for your three weeks. Ask the seller in writing what deposit he holds. If the answer is none after nine years, you're starting a tenancy with no security at all, and how and whether you can collect one from an existing month to month tenant depends on your state's rules, so ask a local attorney that specific question.