Rent increase for half the units?

Question

BP Family,

I am closing on an 8 unit property this coming Friday. In 4 of the units, I will be collecting 875-950$ per month, which I'm ok with. In the other 4 units, the residents are paying 700$ a month (people who have lived there for quite some time), I'm not ok with. Every time I've purchased a property I've always raised the rent (It is the best time to do so, in my opinion), my question is, I've never had a situation where I needed to raise half the tenants rents, how do I go about this? My thoughts are to just put out a letter stating that it is my company policy that each of my residents pay 875$ and above? Any thoughts? Thank you.

Will Fraser · Answer

Congratulations on the upcoming 8-pack!  That's a great way to grow!

Assuming they are on month-to-month leases, you can certainly do this.  I am a fan of providing options for the tenants, such as "you can sign a 1-year lease at X, a 2-year lease at Y, or you can be MTM at Z" and making sure all of the terms make sense for me.  That way I can offer them the ability to check their boxes while checking mine.

You may in fact lose a number of these tenants, but I think you'll generate more good-will through options than company policy at this point.

Braden C. · Answer

We've always gradually raised the rent over a few months, it has seemed to work better than just abruptly doing it at once. I personally would raise it $50 a month until you reach your desired $875.

Sending out a letter is a good idea explaining the new rent and your policies. I am assuming there are no leases already in place?

In the end, half the building will be upset that their rent is going up and half the building will be happy that everyone is paying an equal amount.

Stephen Jones · Answer

@Braden C.- Thank you for the feedback!

@Will Fraser- Great ideas man! Thanks