Under market rents

[Charles Graham]

When buying a new multi and the tenants are pay under market value. 
how do you go about getting up to market value?

Do you go up a little over time ?

Or go up a big jump ?

[Warren Lizo]

@Charles Graham

It depends on your strategy for the asset, the tenants, and your financial/time abilities. There is no universal method, but how you want to approach it may factor into your investment criteria. I do recommend providing them comps to their existing apartment in your conversations. Be realistic in your comps. Remember, the foundation of a long and productive relationship is communication.

Some approaches:

- Step ups monthly or quarterly
- Bill back utilities or obligations, if lawfully permissible
- Work with housing assistance provider, if applicable
- Large increase on lease anniversary (this could encourage vacancy)

Give them ample notice of the increase (60+ days). If they cannot afford the new rent and intend to leave, tell them you will reduce the increase initially if they give you access to work on it. I've installed tons of new kitchens and baths during occupancy which cuts down turnover time significantly.

Also, if you buy a property with existing tenants in place and rents are way below market, I recommend re-screening them as part of signing a new lease. They may not be financial capable of a higher rent.