Raising rent during pandemic
Hi BP,
I am set to close on a 12 unit apartment building Aug. 1st. The rents are a little low compared to the other rents in the area. What are your thoughts on raising the rent with everything going on? The rent raise would probably only be 50.00$ per unit. Thanks!
Most Popular Reply
@Stephen Jones - I agree with @Steven Segal, vacancies are expensive. $50 a month is not worth it in my opinion to get new tenants. Nothing to do with the pandemic. If your rents are $700/month and you kick someone out/don't renew their lease. The unit will likely be without rent for about 2 months. So you'll lose $1400. It will take you 28 months of an extra $50 per month to make up for that $1400 loss. I would let it happen more naturally. As leases come due, certain tenants will inevitably decide to move out. That's when you raise the rent. Also, upon renewals, increase rents $15 or $25 (these are based on a rent of $700. If your rents are $1500 obviously you'd raise them more). Then you keep the tenant, and you're getting more per month, and you don't incur any vacancy costs. I would also invest some money that you would've lost due to vacancies into, common areas, exterior and any maintenance issues that have been neglected. That way your current tenants are likely to stay when you raise the rent $15 or $25 and it will be easier to get new tenants at $50 more per month.