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Lowered my rent to keep a tenant.

October 23, 2011

I just ended up lowering my rent on Property 3 to keep my tenants. This is my refugee family from Iran. They are struggling with job issues, but they want to stay. I really want to keep them as well. They pay on time are very respectful and are accepting of the house in its current condition. It is not in terrible condition, but would need updating if I were to rent it out today and get market rent.

What they were asking for was quite a reduction, so I told them ‘No’ to the first request. I countered that offer and we finally ended up at the following: Original rent $1,350 per month – New rent at $1,200 per month.

This is a reduction of over 10% and I would normally NOT do this, but the tenants are good and I have some issues with the property itself. This property is in a class A neighborhood, but the bathrooms and kitchens are outdated, Jacuzzi does not work, fence is falling down, foundation is shifting, etc. Normally these kind of items don’t really concern me for a rental property, but this is a Class A neighborhood. Some of these items would need to be repaired to approach market rent and it’s possible I could have problems getting it rented with these issues. The other problem is school has already started this year and I fear a large portion of my good tenant base is not looking right now.

I am agreeing to the lower rent but I am trading this for the following:

  1. 24 month lease
  2. Rent paid quarterly (non-refundable if they move out early)
  3. Termination penalty if they don’t live out the 24 months (explained below)

The termination penalty will work as follows:  they owe the difference in $1,350 vs $1,200 for the remaining months of the lease term. For example, if they stay for 18 months and have to leave for some reason – they would owe me $900. This is the $150 variance from $1,350 to $1,200 for the remaining 6 months of the lease term. If they refused to pay it, I would take this from the deposit. Unfortunately, this would leave me no deposit if there were any damages. This whole idea is kind of a “throw-in” anyhow to stress the importance of them living out the lease.

I typed this up, but once again I do everything myself and it has not been reviewed by an attorney. Ideally getting them to sign it will encourage the right behavior. At the end of the day, a vacancy at this property would cost me more than the reduced rent amount and I am very comfortable with the current tenants.

 Lease Addendum 2604 (Sept 2011 24mos) ext

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