Real Estate Investor · Buffalo, NY · Member since 2009 · 21 posts · 1 vote
Ok so we are looking at a property where the current rent being charged is $325 per month. The going average for the area is $500-$550. Without using a property manager, purchase the property we would want to raise the rent to the average for the area. Can you tell me what the best processes you have found to be successful at this? Gradual increases? Instant increase?
Any help you can give would be greatly appreciated.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
17y
Some of what you can do may be dictated by law as well. If there is a rent control ordinance, you will be limited to a certain percentage increase every 12 months. The other thing to look at is the demand for units in the area where your property is. If it's in a desirable location, you will be able to get away with larger rent increases than something that is off the beaten path (depending on who your target market is).
If you were to increase rent by 10% annually, it would take you five years to get to market. If you are confident you could quickly re rent the unit, you may be better off giving them a big rent raise if it's legal. If you can get it rented within a month or so, you will come out ahead compared to your current situation.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
17y
Some of what you can do may be dictated by law as well. If there is a rent control ordinance, you will be limited to a certain percentage increase every 12 months. The other thing to look at is the demand for units in the area where your property is. If it's in a desirable location, you will be able to get away with larger rent increases than something that is off the beaten path (depending on who your target market is).
If you were to increase rent by 10% annually, it would take you five years to get to market. If you are confident you could quickly re rent the unit, you may be better off giving them a big rent raise if it's legal. If you can get it rented within a month or so, you will come out ahead compared to your current situation.
Real Estate Investor · Buffalo, NY · Member since 2009 · 21 posts · 1 vote
17y
Originally posted by NC Mark:
Does your tenant have a lease? You cannot raise the rent in the middle of the lease.
And how long has the tenant been there? Are they good tenants?
Will you have to come in and paint and replace carpets and such? Or is the property turn-key rentable?
Personally, I will do most anything within reason to keep a long-term good tenant. But you are losing serious money with your below-market rent.
It's all a judgement call depending on certain variables.
There are no leases in place it is month to month and the tenants have been there a while from what I understand. Yeah in order for the property to be a deal would be contingent on the rents being raised. I will have to look into the legalities of things in NY I guess if I purchase.
Property Manager · Los Angeles, CA · Member since 2009 · 33 posts · 8 votes
17y
You can always use the hud.gov website and look up the landlord/tenant laws for NY... I will say that I disagree with keeping the long term tenants if they are that much below market rent. I don't have anything personally against any of the other posters or whoever may be living there now, but don't let the fear of not being able to find other renters scare you into losing money.
Yes, I am all about favoring long-term tenants, but it is much easier to do when they aren't 40% under market rate... if you are against moving them out... probably do better buying another property.
Or you could split the difference if there are no rent control ordinances in place and let them know you value them and want to keep them, but are going to raise their rent by such and such a month until it is at market... unusual, but might strike a win-win.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
17y
If you're in an area of rent control - I'd MOVE!!!!
As to how much to raise the rent, it would depend on how long the tenant had lived in the apartment and how good of a tenant they are. If they are a great tenant that has lived there for 25 years, I might raise it to market over 2 or 3 years. If they're just an average tenant that has only lived there a year or two, I might raise it to market all at once.
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
17y
For example, when I took over one apartment building last January, one of the tenants (a nurse) had been there 25 YEARS! Her rent was 28% below market. The previous landlord liked the tenant so much that a condition of the sale is that I wouldn't raise her rent for a year. When the year was up, I only raised her rent about a third of the difference between her old rent and market rent. Next year, I'll raise it another third.
Real Estate Investor · Buffalo, NY · Member since 2009 · 21 posts · 1 vote
17y
Originally posted by NC Mark:
Originally posted by Christopher Henning:
Originally posted by NC Mark:
Over the years I've raised the bar over what I consider a 'good tenant'.
Currently I have two 'good tenants' who actually like to pay their rent several months in advance.
Yeah you are probably right with that statement....that stinks that you had to sue them....part of the business though I guess!
Lucky you! I think that most of us dream about having tenants like that!
Yeah, well, I just finished suing four college tenants and eight co-signing parents over $4000 worth of damages so it probably evens things out.
Milwaukee, WI · Member since 2012 · 20 posts · 0 votes
14y
What is a good reason to raise the rent on a tenant that a tenant would understand?
My mother inherited a four family rental unit and it is about $100.00 under market rent. Other four families in the neighborhood are $650.00 and my mothers is $550.00 due to old ownership. Rent has no increased in years.
We even added Central Air units, updated electrical in which other comparable in the area do not have.
Our current tenants are obviously low income or gov subsidized. Any increase will affect them differently. I propose to my mother to increase it $15.00 or $20.00 each year until she is near or just below market value.
What are some good reasons to raise rent that tenants wont get upset about?
Taxes, inflation, etc....
I am assuming that tenants do not know that Inflation has not effected the US economy recently and that property taxes here in Wisconsin are going to go down due to Scott Walker and his pro business stance.
Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
14y
Michael, I know for my Section 8 tenant there are actual rules involved in raising rent. You have to fill out their report 3 months before lease would renew, it asks for statement of reason, and it says must be some improvement, not property tax increase, and you can only raise it 3% a year or something, so for me, not worth the hassle. Also, make sure you're ready for vacancy and turnover costs initially that may cost more than the increased rent you're getting as if they are on a fixed income, they might not be able to cover it. I plan on raising mine to market once my tenant leaves or the same year I have to do any major improvement to the place, but okay for now as I like no turnover costs and someone who pays on time every month.
Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
14y
Originally posted by Michael Dombrowski:
What is a good reason to raise the rent on a tenant that a tenant would understand?
My mother inherited a four family rental unit and it is about $100.00 under market rent. Other four families in the neighborhood are $650.00 and my mothers is $550.00 due to old ownership. Rent has no increased in years.
Thoughts.
They will not care about your reasons. They will either accept it or leave. Wouldn't you?