Below market tenant

[M Edouard]

Hi BP,

I recently got a property in Queens, NY. It is a 4 unit multi family. One of my tenants is living in a 1BR apartment with her husband and her rent is $1100. She has been living in the property for 20 years. She is in her 70's and her husband is in his 80's. She is set to retire next year. 

She does take really good care of the property and treats it like her own. She'll take the trash out and grow flowers on the side and keep a general eye out in the area. 

She is a good tenant but she has a very large apartment with 2 bathrooms . Her apartment can easily be converted to an open concept 2BR. 

She also sells plates on the weekends which I don't mind cause of the culture of the area.

What is the best way to raise it and to how much?

[Helen Adeosun]

Hi there's an investor and a great Bigger Pockets episode on rookie that refers to the "open book method". I'll paraphrase: but essentially since she sounds amazing you let her pick her price. Say hey look you're a great tenant, here are comps in the area. You just acquired the space and have to keep up with the average cost and property taxes. What price do you think would be fair given the comps in the area.

There's a big element of fairness -- and also a consideration of the market that work very well. You can probably use this to bring her closer to market, but knowing New York full market would be tough. May also be a way to get creative and leverage her as a deputized property manager as an arbitrage so you both give a name to the value she provides as a tenant. I'd love other thoughts!