Inheriting Tenants: How to Raise Rent & Protect Yourself (Rookie Reply)

0:00Tony:You got a message from someone you've never met asking if you'd sell your house before it even hit the MLS. Do you know how to evaluate that? Do you even know what your property is worth off market? And what questions should you be asking before you even sign anything?

0:17Real Estate Rookie Hosts:Today we're answering three questions straight from the BiggerPockets forums covering what to do when you inherit a tenant mid-purchase, how to evaluate whether short-term rental is worth it in a saturated market, and how to know when you're actually ready to scale from one door to two.

0:36Tony:This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

0:39Real Estate Rookie Hosts:And I'm Tony J. Robinson. And with that, we're going to jump into our first question today, which comes from the BiggerPockets forums. Now, this question says, I just closed on a single family rental, congratulations, by the way, and found out that the current tenant's lease isn't up for another seven months. The previous owner never mentioned this. This tenant has been there for three years, pays on time, but the rent is$300 per month below market value. I want to raise the rent when the lease expires, but I'm also scared of losing a reliable long-term tenant. How do I approach the situation as a brand new landlord inheriting someone else's setup?

1:17Real Estate Rookie Hosts:All right. I love this question because I get to use my favorite phrase, which is an estoppel agreement. So if you've been around for a while, you know that I've learned how to both what that word is and how to spell it on the podcast. But, Ash, for our listeners that maybe aren't familiar with that, break down what an estoppel is and why it might be beneficial in situations like this.

1:36Tony:Yeah. So this is too late for this person asking this question. But before you actually close on the property, you should ask the seller if you can give an estoppel agreement to the tenants. And this is basically a form that the tenants are filling out with how much rent they're paying, when their lease expires, when did they move in, do they have any pets, what appliances belong to them, what utilities they pay, which ones the landlord pays. And basically, you're taking the information they are telling you and you're verifying it with the lease agreement or with what the landlord says. And that way, if there are any discrepancies, you can figure it out before you actually close on the property.

2:13Tony:so you know if a tenant fills out and says hey I you know I pay$300 a month but I own all the appliances but the landlord is saying like no I own the appliances you're buying them with the property like you can figure out that situation and how to handle it before you actually close on the property because if that tenant moves out and all of a sudden you have to buy all new appliances like that could be a big chunk of money out of your cash flow that you need to cover to be able to rent it back out. So try and do that always when you purchase a property that is not vacant and has tenants in place.

2:48Tony:What you can do now is it really depends on your state laws. You could always offer a lease if they agree to the renegotiation of the lease and they sign the new lease without thinking they're getting kicked out and things like that where they're signing it under false pre-census, and they agree to the increase. But most likely, you cannot raise the rent until their lease has expired. And in some states, there's even regulation as to how much you can actually raise the rent on them. So even if they're$300 below market, it may be several years before you could actually even bring it up to market because of those regulations and those caps on raising rent.

3:33Tony:So the thing I would do is give them the most notice you can. So I would give them a lease renewal now that starts in the seven months. So that way, if they decide that they're not going to accept that lease agreement, you're also going to want them to sign a form saying that they're going to terminate their lease when it expires. And you can also give them the option to terminate it early if you wanted. I usually don't. I usually let it go the period. But if you wanted them out so you could get somebody else in there, you could do that too. But you give them those two options and it's their option if they decide to renew at the new price or if they are going to vacate the premises and are not going to accept the new lease agreement.

4:16Real Estate Rookie Hosts:Yeah, Ash, all great points. I think the only thing I want to add to that is just to also do the math, right? You said yourself, this is a reliable tenant. They've been there for a long time. I guess we won't know just yet if they're the kind of tenant that causes a lot of headaches, but assume that they're just an all around solid tenant. There's also, I think, some peace of mind math that we can incorporate as well. At$300 per month below market value, I mean, that is a significant amount. That's$3 ,600 per year in potential risk or missed rental income. But you also have to compare that against, okay, if I do let this tenant go, how long do I think I'll be vacant for this listing?

4:57Real Estate Rookie Hosts:And let's say that your rent is maybe 2000 bucks per month, and you're vacant for two months, well, you've just eaten up, you know, for that entire year, all of that potential extra profit you'll gain by getting to market value. But hey, if you know, every rental unit is gone before it's even fully vacant, well, then maybe you've got a really good case there to relist this at the new price. But as you have that conversation, Dion McNeely, who we've had on the podcast a few times, he's spoken to BP Con, I love his approach, which is called the binder method, we won't go into it in detail here, but if you just search the Real Estate Work YouTube channel for binder method, you should find our episode with Deion McNeely.

5:33Real Estate Rookie Hosts:And he walks through how he actually gets the tenants to agree to a rent increase, and he's just presenting them with options. So it's a really, I think, unique way to be able to raise the rent while still keeping a really good relationship with your clients or with your tenants.

5:47Tony:Coming up, short-term rentals are everywhere right now, but is it actually the right to move in a market that's already flooded with Airbnbs. We're going to tackle that question next, right after a word from our show sponsors.

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8:23Tony:Okay, welcome back. So now that you know how to handle a tenant you didn't choose and how to increase their rent, let's talk about a strategy a lot of rookies have questions with and are wrestling right now. Okay, so this question comes from the BiggerPockets forums and it says, I'm analyzing a property in a beach town that I think could do well on Airbnb. beef. But when I search the area, there are already hundreds of short-term rental listings. The long-term rental numbers don't work as well, but at least they're predictable. How do I decide if short-term rental is still worth pursuing in a saturated market?

8:57Tony:And what data should I be looking at beyond just the number of listings? Well, good thing we have our in-house analysis, non-paralysis. Tony J. Robinson here to break down analyzing a short-term rental. And first of all, Tony, saturated markets. Yay or nay? This is rapid fire here. Yay or nay?

9:23Real Estate Rookie Hosts:Yay.

9:24Tony:Okay. And then we're going with software. Off the top of your head, what's the first tool, the first piece of software that you need to actually start analyzing this deal and get the numbers and the data.

9:35Real Estate Rookie Hosts:AirDNA, easy.

9:37Tony:Okay. Okay. Now tell us more.

9:41Real Estate Rookie Hosts:I think the word saturated is a bit of a nuanced phrase. I think a lot of people throw that word around without understanding the different layers or things that go into saying whether or not a market is actually saturated. Just because there are a lot of listings doesn't mean that a market is saturated, right? Like there could be just a lot of demand in that market as well. So I'll break it down. The things that I look at to actually gauge whether or not a market is quote unquote saturated or if there's maybe an imbalance between supply and demand. I do look at the number of listings, but not just the raw number of listings.

10:14Real Estate Rookie Hosts:I look at how those listings have changed over time. What is the percentage increase in a market over the last, call it three years, of the number of listings in that market? And what rate is it increasing at? It's not bad to see listing growth in a market because it means that more people are coming in because maybe there's more opportunity. But then I compare that number to the actual demand in that market. And when you use a tool like AirDNA, you can actually see across an entire market how many nights were actually booked for that market. And if I go back again over the last three years, and I see that supply has been growing at 4%, but demand has grown 10 % over that same timeframe, well, that's actually a really good balance, right?

10:55Real Estate Rookie Hosts:Like demand is actually outpacing supply. In other markets, maybe supply is flat, but if demand is decreasing 3 % year over year, that's a bigger issue, right? So I'm not just looking at listings in isolation or demand in isolation. We need to look at them together, understand the trends between both, and then understand what that balance actually looks like between the two of them. So supply, demand, and the other things I look at is across the entire market, how is occupancy changing? How is the average daily rate changing? So if I can see a market where there's steady growth in supply, there's steady growth in demand that's hopefully at or above supply, and I'm seeing healthy growth in occupancy and in average daily rates, to me, that is a market, even if there are hundreds or thousands of listings in that market, that there's a good balance between supply and demand and therefore not quote unquote saturated.

11:49Real Estate Rookie Hosts:All right, guys, we're going to take a quick break before our last question. But while we're going, be sure to subscribe to the Real Estate Rookie YouTube channel. You can find us at Real Estate Rookie. And we'll be back with more right after this. If you own a short-term rental, here's something worth knowing. Not all landlord policies are built for your type of property. And with holiday bookings, chilly weather, and higher guest turnover, having the right coverage is more important than ever. Steadily offers insurance designed specifically for short-term rentals, covering property damage, liability, lost rental income, and even unexpected issues like bedbugs.

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13:16Real Estate Rookie Hosts:We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselain fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cashflow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees. It's just cleaner. Sign up at baselain.com slash BP and get a$100 bonus. BaseLane is a financial technology company and not a bank. Banking services provided by ThreadBank.

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14:21Real Estate Rookie Hosts:They've been trusted partners with BiggerPockets for over a decade. And if you want to learn more, visit biggerpockets.com slash retirement. There's a point where basically every investor realizes traditional financing stops scaling with you. At first, it works. You qualify with your income, your job, your tax returns. But as you grow, that model starts to break. Now, it's not really about your personal income. It's about the income from your properties. That's where DSCR lending comes in. And it's why a lot of investors end up working with lenders like Host Financial. Host Financial qualifies deals based on property income, not personal income.

14:58Real Estate Rookie Hosts:So you're not dealing with W-2s or tax returns or DTI constraints. And with 80 % to 85 % LTV, you can stay more flexible as you scale. It's just a different framework, one that tends to align better with how investing actually works. If you're buying rentals, refinancing, or growing your portfolio, go to hostfinancial.com. That's H-O-S-T financial.com and see what you qualify for. All right, let's jump back in. Our final question is for anyone staring at their first deal, wondering if they're actually ready or maybe already trying to figure out when the second one should happen. So the question says, I bought my first rental property eight months ago and everything is going well.

15:37Real Estate Rookie Hosts:Tenant is solid, cash flow is positive, and I've got some reserves built up. I keep hearing that I should scale, but I don't know what that actually looks like or how to know when I'm ready. How many doors should I have before I try to grow? And what does scaling actually require that most rookies don't plan for? This is actually a good question, right? Like no one really talks about like how to know if I'm ready to scale. but first let me say the fact that you've got a solid you know we'll call it like you're on base right maybe not a home run of a first deal but you made the first base with your first deal that is a great starting point you said you've got reserves built up cash flow positive so you've learned a lot I think when we talk about scaling what it really comes down to me is more so what are your goals as it relates to real estate investing is this something that you're doing maybe in the background to help supplement your retirement?

16:30Real Estate Rookie Hosts:Is this something you're doing to maybe build cash flow aggressively? Are you doing this because you want tax benefits? And depending on which one of those things is really motivating you to invest in real estate at all, I think will help you decide what type of scaling makes the most sense for you. Because I know some people who invest in real estate and they're high income earning W2 folks who enjoy what they do. They have no desire to leave and they plan to do this for the rest of their lives. For those people, scaling maybe looks like buying one property every one to two to three years and just letting it build cash flow or build appreciation and letting that cash flow stack.

17:06Real Estate Rookie Hosts:For other people, they want to move more quickly, right? They want to get into this full time. They want to make this an active business. Their approach is different. So for me, I think scaling the first question you have to answer is what do I actually want out of this?

17:17Tony:I think the problem is in this question is that you're coming at as people are telling you this is what you should do. You should scale. And that's the problem that I had, as in I thought I should be doing this because people were telling me to do this or people were doing this and I saw them doing this like on social media. And I thought, I need to get to that point. Like that's the next step. And just like Tony said, you really have to evaluate what your own progression and what your why is and what you want out of real estate. so you've already got one duplex like I think a really great next step would be just to buy another duplex I think it is really important to build a solid foundation of what you know what's working for you and what you can be successful at so you've already got one deal that is working for you replicate that and yes it's the boring way it's not flashy it's not shiny It's not the hottest new strategy of 2026, but that is going to help you down the road.

18:21Tony:If you do decide to take on a different strategy to pivot or, you know, the market changes, you have to pivot. But if you have that strong foundation, it's really going to help you. And the biggest thing is don't forget about your lifestyle. Don't forget about the things you want. If you start growing and scaling too fast, that's going to eat up more of your time, more of your energy. and focus now on building systems. So as you're buying this second property, literally document every single thing that you are doing so that when you go through it for a third time, you have your whole process to follow that you're not forgetting things, you're not getting overwhelmed with stuff and you have it all together.