New multi-family property owner.

[Tony Clark]

Hello everyone.

I am brand new to owning a multi-family property and to this website.  I hope I am doing this correctly. :)

So today I closed on my first real estate investment property.  It is a 5 unit property that consists of 2 duplex's and a cottage.  In all it is 3 units that are 1/bed 1/bath and 2 units that are 2/bed 1/bath.  At this time all of the units are rented out and well maintained but they are being rented for well below market value for my area (Olympia WA).  I have 3 units that are on month to month leases and 2 units that are leased out through July of 2022.  

To give you guys an idea of what Im working with, one of the 1bd 1bath units is being rented for $650 a month and the other 2 are being rented at $850 each, while the 2bd 1baths are both being rented at $1000 each.  I have looked at comparable properties in my area and the 1 beds should be more like 1300 - 1400 while the 2beds should be 1500 - 1600.  

My question here is how would you guys approach raising the rents on these tenants by such a large margin?  I understand that its just business and it comes with the territory of property management, but I am wondering if you guys have any strategies or tips on how to soften the blow.  

[E. C. "Stony" Stonebraker]

@Tony Clark, I agree w @Bjorn Ahlblad regarding which tenants to address first.  If the tenants are reliable, pay on time and take good care of the units, you could renew them at gradually increasing rates until they were at market rates.  If you want to bring them up at once, get your marketing plan in place before notifying them.  You want to refill the units as quickly as possible after they vacate. If the units need renovation to make them competitive, you want to get contractor quotes for the cost of rehab, too before vacating them.  Congratulations on your first property!  You are on your way!