Investor · Oakland, CA · Member since 2016 · 25 posts · 4 votes
Hi–
I just bought my first rental property – a 4plex of 1/1s in the Vallejo, CA area. I'm inheriting 4 tenants, 3 of whom are month-to-month. I'm looking for the best way to get the 3 month-to-month tenants up to reasonable rents. There is no rent control. Should I offer them financial incentive to sign year leases? Should I get them on my leases instead of the previous landlord's?
Some background info:
Unit 1: $1150/mo – upper unit with view, some recent renovations. on year-long lease ending 11/17.
Unit 2: $775/mo – upper unit with view. month-to-month, tenant since 9/10.
Unit 3: $800/mo – lower unit. month-to-month, tenant since 7/14.
Unit 4: $775/mo – lower unit. month-to-month, tenant since 5/11.
Unit 1 i'm happy with.
Unit 2 looks like the biggest opportunity for raising rent. in it's current condition, it looks like i could get 875-950 for it. after some updating, i could get 1100-1350 for it.
Units 3 and 4 could probably max out at 850. after improvements i could get ~1k/unit.
If they are good tenants i would like them to stay. I certainly appreciate the longevity. any advice would be greatly appreciated.
I have leased up properties where I have inherited tenants.
I take a two staged approach normally depending on the landlord you want to be.
1) Determine the "quality" of your tenants. Are they paying on time, not causing issues and overall taking care of the unit.
2) Determine the updates that need to be done to the units or the exterior. (ask the tenants what would make their living conditions better) This would be stated that we are going to be making improvements to the units and that once they are completed then we will be raising the rents slightly to adjust for the changes.
3) Communicate to tenants and show them their alternatives (normally if you are at or close to market then the hassle of them moving will not will not be worth the 50-100 dollars extra that you are planning to charge)
I have leased up properties where I have inherited tenants.
I take a two staged approach normally depending on the landlord you want to be.
1) Determine the "quality" of your tenants. Are they paying on time, not causing issues and overall taking care of the unit.
2) Determine the updates that need to be done to the units or the exterior. (ask the tenants what would make their living conditions better) This would be stated that we are going to be making improvements to the units and that once they are completed then we will be raising the rents slightly to adjust for the changes.
3) Communicate to tenants and show them their alternatives (normally if you are at or close to market then the hassle of them moving will not will not be worth the 50-100 dollars extra that you are planning to charge)
I agree with all that Drew said but wanted to add a little more.
First, determine what market rents will be once you have done some fairly minor fix up. Let me know if you need help with that I will find a good website for it.
Second, beware of the two most common mistakes new landlords make and try to avoid making those mistakes: Don't over improve your property and don't try to maximize your rents at the cost of vacancy and high turn over (either will destroy your profits so don't get too greedy).
I like to charge about 5% below market rate because tenants feel they are getting a good deal they appreciate the property better and satay longer.
In general, keep a tenant who is not bad if you can.
Are there any tenants who are section 8? Special rules apply to move them out. If you are raising rents a great deal remember you have to give the tenants 60 days advanced notice instead of just 30.
Why are the rents so low? What is the property address? (I am a real estate agent and I live in Vallejo so I am curious.)
One strategy I am following with my recent 4plex is to update the common areas (if needed in your case) to show the tenants I care about the property and then raise the rents .... I don't want to scare them away thinking I am only about raising money.
Agree with Drew you also could move one into a updated rehab unit an then rehab that unit an when done move another tenant in when finished an so on till all are on the same rent you want.
Ari Archer I'm the over conservative person who doesn't raise rents in tenants that are low/no maintenance and pay like clockwork. I'll take a sure $775 over adding risk for $850. I've had a couple of tenants in that boat but they also happen to be the ones that tell me they fixed their own garbage disposal, never bug me about little things, etc. so there's "value" there. I'd evaluate it on a tenant-by-tenant basis.