Raising rent on long-time inherited tenant.

[Jason Arnett]

I’m under contract for a multi home property, which I am house hacking. I will be inheriting a 20 year tenant, who has been great. According to the current owner, he has never been late on payment, and is a model tenant. The current owner inherited the property from his parents 4 months ago, which is why he has not raised rent. The issue is the current rent is at $350 dollars ( not raised since 2003), which is $400 below local comp. With minor repair and updates (under $2,000), I would expect $875-$925 per month.  I plan on being open and forthcoming about whatever I decide to do on the day of closing. I want to keep him as a tenant, but at the same time I need the extra income from this unit to make the house hack viable. 

I would love to hear any advice, especially if you have experience in situations like these  

[Kimberly Elson]

I bought a duplex last year (house hack) with the tenant on one side (that wanted to stay) having been there for 14 years. Market rent without updates to the unit was $1500-1600, she was paying $800/ month. No lease was in place. I explained that with my mortgage cost and the unit immediately needing a new roof and a few other repairs I would have to raise rent, but she was more than welcome to stay on a month to month lease as she was very cooperative w showings and inspection, and her unit was nicely kept. After explaining why I had to increase I raised rent to 1400 no problem. She was aware she was paying less than market- no increase for the last 11 years. She was happy to get to stay, and I kept the rent slightly under market to avoid turnover right when I bought the place so I could renovate the other side. I feel like I got very lucky, but with current rents in my area getting to stay in her long term home and still be below market was a win for her and I got to have 0 vacancy which was great starting out. I’ll raise it again after year 1 to get closer to current market rates. Good luck!