I just bought a duplex fully tenanted. Market rent is $600/unit. It is rented for $425 and $475/mo.
The $425 tenant has been there ten years. They have accepted an increase to $500/mo.
I haven't talked to the other tenant yet but I'm thinking $550.
Am I being a wuss by not moving them to market rents?
The leases are up at the end of the month.
They both pay timely so I don't really want them to go.
After 10yrs I imagine that the unit would need a major overhaul. Sounds like a lifetime tenant as well. Between the rehab & turnover costs every couple years I think you would eat away that $1,200. I'd keep them at $500.
Agree. Also.. update a few things and come back in the future and get a little more. Don't push it. Unless they are a pain in the *** tenant.
We have some duplexes. I try to keep both sides updated about the same and the rents the same. Tenants talk and tenants compare things when they live side by side. If one unit has an extra amenity or something, that would make a case for different rents.
Long term tenants are gold. Keep the rents below market, be responsive and timely with maintenance and repairs, and treat the tenants with respect and kindness.... they will stay with you.
Your idea sounds fine for doing $500 and $550 at first, but I would plan to raise the $500 unit to $550 within the next two years. Maybe throw in an extra amenity to give added value when you raise the rent. Wait until a vacancy to get to $600 or whatever market rent is at the time.
Marcia Maynard, Fischer Properties | Podcast Guest on Show #83
Thanks everybody. If they moved out, I would need to overhaul.
It seemed fair to me but I wanted to get other opinions.
I agree with others, don't push it to get the extra little bit of money. We bought a triplex in 2010: one 3 bedroom and two 2 bedrooms. The 3 bed tenant has lived there over 10 years, and her rent is lower than that of the 2 bedrooms, so she's way under market rent (about 20% or so under). Her unit needs a complete rehab when she vacates (new kitchen, etc.), but she told us she has no plans to move for a long time (has young kids, it's "home" for her). We just finally raised her rent a little last year, and may raise it a little more again this year, but we don't want to drive her out, so we plan to keep her below market rent for a 3 bed for as long as we own it (probably selling it in the next few years).
I would not increase much for long term tenant if any...currently my longest tenant is 6 yrs and I will not increase rent . Initially it was slightly above market...pay timely and keeping place up...
Incremental increases are a lot more tolerable for renters. If they are renting in the 500-600 range then an extra $50-$100 a month can be a huge chunk out of their budget, sometimes enough to make them want move.
I remember when I was a renter- I tolerated the $15-$20 raises (with grumbling) but when the place got sold and the new owner wanted 50% more than what I was paying I was horrified! Now, of course, I understand the economics of what was going on for him (he had just spent a pile of $$ to buy in a rapidly gentrifying area) but at the time it sure looked like meanness and greed, lol! It was actually one of the catalysts for me to buy a place of my own and, eventually, become an investor myself, so I guess that's a happy ending
Jean Bolger, 33 Zen Lane | http://www.solidrealestateadvice.com
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