Raising rents and feeling guilty??

[Daniel D.]

Hey Everyone, 

I hope i put this in the correct category. 

I generally do not do yearly rent increases on my properties if the tenant is clean, pays on time, and is overall a good tenant. I might raise 2% every 2-3 years if my taxes/costs/insurance goes up but most of the time I'm generous. Currently, I'm in a little dilemma where I have to raise the rent drastically for my deal to work. I purchased a 6 Unit property in New Jersey. 3 Units are at $900/mo 2 units are at $450/mo and 1 unit is $750/mo. My current monthly income on the property is $4,350.00. It needs to be at $11-12,000. 

The units are all 3 bedrooms 1 bath, and all in good condition. The rents for that type of apartment are currently around $2250/month. I need to raise them to at least $1850-$1950. The tenants that are paying $900 should not have any issues, but the 2 tenants i have that are at 450 and the one at $750 are going to have a heart attack when they see the new leases. 

I really feel bad for them, some of them are older couples, but i don't have a choice.. Just putting this out there to see what you would do in this type of situation. 

I will also offer to renovate their apartment, new kitchen, bathroom, flooring, and a paint job. 
 
PS

The building is not rent-controlled. 

Thanks

Dan

[Greg M.]

Quote from @Daniel D.:

Rent needs to be raised because it is under market. Market rent doesn't care about what numbers you need to hit to be profitable. 

The tenants know they are vastly underpaying. They're not stupid. They knew this day would come. They either can or can't afford the market rent. Bribing them with a renovation isn't going to make them feel better or suddenly allow them to afford it.  

The reality is that you're probably going to lose all 6 tenants. Tell them all the new rent and when they all reply they can't afford it, give them the end date of their lease. Be fair, give them 90+ days and make it extremely clear that they need to start looking today, not day 89, as there will be no extension.