Rental Property Investor · West Lafayette IN · Member since 2018 · 88 posts · 30 votes
We are looking at a 32 unit property in which rents are $250-400 below market rents. Obviously this is great for our potential growth in the coming years, but how would you go about increasing the rents? Does anyone send out a letter upon acquisition letting the tenants know the property is under new management and to expect rents to increase by that much?
One tenant has been there for 24 years, and I know I would hate to receive my renewal notice and see my rents have increased by 60% without any warning.
Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
6y
@Katie Jewell It really depends on your approach. If you send out letters in the style that you mentioned, you should expect most of your tenant base to leave once their current leases expire. It's definitely one way to do it, but you should be prepared for higher vacancy and you should make sure that the area has a good supply of the tenant base that you're looking for in order to get those higher rents.
A better approach is likely phasing the increase in over 2-3 years, adding a little bit to the rent each year. Is the increase being achieved through the implementation of a physical value-add program or simply through organic rent pushes?
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
I guess it depends. I'd like to get a sense if the tenants are good (reg pay and no probs) or PITAs. PITAs get the highest rent bump you can legally get away with.
On a long-term guy with low income, I've got 2 and I give them slight bumps, but am trying to be nice since they are older.
In any case, I think you need to get all tenants on a sched with annual rent bumps.
Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
6y
@Katie Jewell If you're doing a physical value add that includes upgrading the unit interiors, then I'd suggest implementing the rent increase after you upgrade each unit. My best suggestion is to upgrade the unit interiors as the units turn. Being that the units will already be vacant, you can then start turning the tenant base little by little.