Looking to purchase a rental, not sure how to raise rent...
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
Hello all! First let me ask that you don't bite my head off, I'm new to REI. I have done two flips but would like to purchase a multi- family unit. I have found a duplex but it is currently occupied and both tenants are paying way below market for rent.
What is the right way to go about raising the rent to market value? I’d like to know my options before jumping in.
I was in the same boat and used this letter and gave them 30 days to make a choice. Just copy and paste it into Word and make it your own. I also added a line if they wanted to terminate their tenancy as a option (Everyone stayed !) Mine were all month to month. mine when up between 75-100 a month if your are really low you could offer lease options with step up in rents over a year or two if they commit to a longer term lease
Lease Renewal Decision Form
Date ___/___/___
Dear ______________________,
Thank you for your tenancy at _____________________________! We’ve really appreciated having you here this past year and look forward to continuing our relationship with you. It is a privilege to be able to work with you and we thank you for your business.
According to our records, it appears that your lease-term is coming up at the end of next month and, as such, we need to discuss your future plans with you and make sure we are all on the same page. Due to naturally increasing expenses for the owner, it is necessary to gradually increase rent over time. Therefore, a slight bump in your monthly rental rate will take place soon. However, we would like your input on where to go from here.
Please choose from one of the following options for your future at your home. Simply circle the option below you would like to choose, and send this form back to us. We will prepare a new lease with the proper information and mail it to you within seven days.
Sign a new one-year lease at $________ per month, which will begin on __________ and end on __________. This is an increase of $________ per month.
Sign a new six-month lease at $________ per month, which will begin on __________ and end on __________. This is an increase of $________ per month.
Sign a month-to-month lease agreement at $________ per month, which will begin on __________. This is an increase of $________ per month.
Although we hope you’ll stay with us forever, if you do not plan on renewing your lease and staying with us any longer, please let us know immediately. Our state law requires tenants to give ____ days written notice to vacate before the end of their lease. Therefore, please return this form and let us know your plans by ___________ so we can make plans that work for everyone.
Once again, thank you for your residency here at [address or apartment complex name]; we look forward to many more years of working with you.
Sincerely,
Management
@Mandi Martinez remember that the lease that the tenants are in goes with the property. So if one tenant has 6-months remaining in their lease, you can’t increase the rent until it’s up. Month-to-month leases usually need 30 days notice, depending on the state and lease.
So it’s important to understand where the leases are, and include in your offer/contract that seller will not enter into any new/renewed leases without buyers approval.
After that, it really depends on what you want to do. You can always explain to the tenant that they are paying way under market rent, and their rent will increase $$$. But many tenants won’t like that, nor necessarily be able to pay the additional. So you may need to terminate the lease, and find new tenants. Plus do some fixes too, as properties like this usually have deferred maintenance.
Once the lease term is up, you can raise rents as you feel fit. If I am doing a sizable increase, we send a letter/email with data showing rent comps that support the new rent. We keep it just a bit below the market. When you do a big jump, expect them the leave, so understand the renovation needed in that unit in order to increase rent to market.
Well each state is different but many states right now you cannot raise the rent with CoV restrictions. As well be advised that many states are working on legislation that's going to prohibit rent increases for up to 1-2 years following the epidemic. Even after that has passed I have seen wordage that limits any raise to 3 %.
FYI, pretty lousy time in history to want to become a landlord. With house prices up nation wide the one exit ramp remaining is you can sell your homes. REI was once a great way to build wealth. In the future not so much unless you want mass rules.
You won't be able to raise rents until the current leases expire. When you buy a home w/ tenants, normally, you buy it subject to the current leases in place. So you won't be able to change the lease terms until the end of the lease term
I was in the same boat and used this letter and gave them 30 days to make a choice. Just copy and paste it into Word and make it your own. I also added a line if they wanted to terminate their tenancy as a option (Everyone stayed !) Mine were all month to month. mine when up between 75-100 a month if your are really low you could offer lease options with step up in rents over a year or two if they commit to a longer term lease
Lease Renewal Decision Form
Date ___/___/___
Dear ______________________,
Thank you for your tenancy at _____________________________! We’ve really appreciated having you here this past year and look forward to continuing our relationship with you. It is a privilege to be able to work with you and we thank you for your business.
According to our records, it appears that your lease-term is coming up at the end of next month and, as such, we need to discuss your future plans with you and make sure we are all on the same page. Due to naturally increasing expenses for the owner, it is necessary to gradually increase rent over time. Therefore, a slight bump in your monthly rental rate will take place soon. However, we would like your input on where to go from here.
Please choose from one of the following options for your future at your home. Simply circle the option below you would like to choose, and send this form back to us. We will prepare a new lease with the proper information and mail it to you within seven days.
Sign a new one-year lease at $________ per month, which will begin on __________ and end on __________. This is an increase of $________ per month.
Sign a new six-month lease at $________ per month, which will begin on __________ and end on __________. This is an increase of $________ per month.
Sign a month-to-month lease agreement at $________ per month, which will begin on __________. This is an increase of $________ per month.
Although we hope you’ll stay with us forever, if you do not plan on renewing your lease and staying with us any longer, please let us know immediately. Our state law requires tenants to give ____ days written notice to vacate before the end of their lease. Therefore, please return this form and let us know your plans by ___________ so we can make plans that work for everyone.
Once again, thank you for your residency here at [address or apartment complex name]; we look forward to many more years of working with you.
Sincerely,
Management