Just bought my first property - question about raising rents

9 Replies

Bought a brand new 3br, 2.75ba house for $197,500. I'm going to rent it at $1300/mo to start [already have tenants moving in the day after I close on 06/08.] Does everyone typically 'build in' rate increases into the lease? I'm working on all my rental docs, and wondering if I need to include a standard increase of x%/yr, or if tenants are averse to this kind of arrangement.

Thanks,

Personally, I take it year by year. You would'nt want to lock your self into a set rate into the future B/C youdont know what will happen to the area. What if the location becomes really hot and you can raise rents more than you agreed to, or if prop taxes increase and you need x amount more. Also if I get good tenants I usually don't increase them as much or at all for their second year. In short take 1 year at a time.

Originally posted by "Rehab702":
Buying at 197,500 and renting at 1300 sounds like a loser unless you put a lot of money down. Are you expecting to make a profit?

8)

I bought this one for my sister to live in. It's not a loser, but not a home run, either. I bought this one as a training property to get all my systems in place for my next ones. The plan is for her to buy the house in a few years - no realtors needed. If she leaves, I can get $1700+ rent for the house.

Originally posted by "niceshoes6":
Personally, I take it year by year. You would'nt want to lock your self into a set rate into the future B/C youdont know what will happen to the area. What if the location becomes really hot and you can raise rents more than you agreed to, or if prop taxes increase and you need x amount more. Also if I get good tenants I usually don't increase them as much or at all for their second year. In short take 1 year at a time.

Thanks - that definitely makes sense.

Black Cobra,

At a purchase price of $197,000, this IS a loser with rents of $1,300 per month or $1,700 per month. OUCH!

Maybe you should have gotten your systems in place before you took a bath on this one!

Mike

Originally posted by "MikeOH":
Black Cobra,

At a purchase price of $197,000, this IS a loser with rents of $1,300 per month or $1,700 per month. OUCH!

Maybe you should have gotten your systems in place before you took a bath on this one!

Mike

Thanks for the constuctive input, Mike! We may have different opionions of 'bath'. Though this property will not allow me to retire comfortably and never work again, it's certainly not going to bankrupt me, either. I'm comfortable with it because of the tenant - I allowed her to pick out the house. I would not have purchased this house otherwise.

Originally posted by "BlackCobra":

Thanks for the constuctive input, Mike! We may have different opionions of 'bath'. Though this property will not allow me to retire comfortably and never work again, it's certainly not going to bankrupt me, either. I'm comfortable with it because of the tenant - I allowed her to pick out the house. I would not have purchased this house otherwise.

Not sure why you giving MikeOH a few tablespoons of sarcasm, here. Perhaps simply because he didn't run the numbers for you?

[email protected]%,30yr is over $1300/month. Even if you never had vacancies, repairs, taxes, etc. you are still losing money each month!

At $1700/month rent, you're still almost certainly going to have negative cash flows, unless you get really, really lucky. If you had no repairs, no vacancy, no evictions, no professional services costs, etc. and only needed to pay mortgage and tax, then you could perhaps pull off $100/month in positive cash flow.

I think you're in trouble. Please push for your sister to purchase the home from you when she can.

Family is more important than money. Any day of the year! I am not saying you people on here don’t care, but why should he PUSH his sister to buy it from him fast.

He said he is comfortable with taking a loss on this so he can learn the ropes. For family, I take many losses but the gain is their wellbeing which out weights the losses any day.

What I believe people are trying to convey here and in another thread is that if you're looking to become an investor, you need to concentrate on buying properties that work, not buying charity properties. It sounds like this property was bought specifically for her family. While that is admirable, and absolutely fine, it would not constitute a "good" investment.

No one is picking on BlackCobra here. They are merely trying to convey that message.