Long time follower, first time poster. I close on my second multi-family home at the end of December. One unit is vacant and the other is rented at $1250 a month, which is well below market value for a 3-bedroom apartment in Massachusetts. The seller has told me that they have been there 3 years, are excellent tenants, and they pay in cash so I would like to keep them. He has also been kind enough to provide me with contact information for a potential renter for the vacant unit at $1400 a month.
Is $100 increase fair or can I go up more? I should be able to get $1500 for the units all day, it is located right near the highway so it is a great commuter location.
Should I use the potential renter he provided me or should I advertise myself and try to get market value?
This is my first absentee owner rental property so I would like to be able to maximize my cash flow as I am still owner occupied at my first two-family which my mortgage is paid for by my tenants.
I wouldn't raise it until their lease ends, and it's time for renewal. Another thing to consider, is if you can fill it immediately, sure, go for $100. If not, I wouldn't even bother them.
Yes, use the referral he gave you but screen the tenant and make sure that they meet your standards. You can raise the rent to the market value and I would approach this with the current tenant as well. Many times people raise rents slow and steady, but I find the problem with this approach is that tenants feel that you are constantly raising their rent and they will push back hard.
I would suggest raising rent to just a little under market. If your property is below market value, this will keep your property rented. The current renter would have to pay higher rent somewhere else and pay movers if they chose to move out. Most long term tenants know that moving isn't cheap and in general is just a pain. In addition, when I raise rent I explain to current tenants that this is a one time rent increase for say 3 years.