Raise Rent on 17 Year Tenant?
Hey BP!
I recently acquired a duplex (two separate structures) in Colorado Springs. I rehabbed one of the homes and doubled the rent with a new tenant. The rent of this unit is almost double the mortgage payment for both properties, so very happy with the cashflow. However, the second home is occupied by an older couple that has been there for 17 years with no lease. It is a great 1br property ~800sf with a large yard and workshop.
The Problem: market value on other house is ~$800 - $900, and she is currently paying $600. If I put a few bucks into it I could probably get $1000 - $1100. BUT, the tenant (who takes great care of the place), is very vocal about being financially strapped. She said that if I raised rent, she and her husband "would be homeless". YET, she does not have a job! She just sits around the house all day. I know she doesn't want to leave because she has befriended the stray cats in the area and thinks they are her own.
My Options:
1) Do not rehab the property, but raise rent to market value. (The long time tenant will probably leave)
2) Raise rent gradually. $100 this year, and another $100 next year. Hope that the tenant don't leave, gets a job, and stays
3) Do not raise rent
4) Rehab the property (~10k new flooring, counter tops, appliances, paint, etc.) and hopefully get a new tenant at $1,1000
Either way, I'd like to get the tenant on a lease. I'm leaning toward option #2.
My Fear: That the tenant will not be able to pay more, but will squat in the property forcing me to go through a pricey eviction process.
Thanks you all in advance for your advice. I'm really torn on this one.
My very best,
Jeff