Investor · Oakland, CA · Member since 2016 · 25 posts · 4 votes
Hi–
I just bought my first rental property – a 4plex of 1/1s in the Vallejo, CA area. I'm inheriting 4 tenants, 3 of whom are month-to-month. I'm looking for the best way to get the 3 month-to-month tenants up to reasonable rents. There is no rent control. Should I offer them financial incentive to sign year leases? Should I get them on my leases instead of the previous landlord's?
Some background info:
unit 1: $1150/mo – upper unit with view, some recent renovations. on year-long lease ending 11/17.
unit 2: $775/mo – upper unit with view. month-to-month, tenant since 9/10.
unit 3: $800/mo – lower unit. month-to-month, tenant since 7/14.
unit 4: $775/mo – lower unit. month-to-month, tenant since 5/11.
unit 1 i'm happy with.
unit 2 looks like the biggest opportunity for raising rent. in it's current condition, it looks like i could get 875-950 for it. after some updating, i could get 1100-1350 for it.
units 3 and 4 could probably max out at 850. after improvements i could get ~1k/unit.
if they are good tenants i would like them to stay. i certainly appreciate the longevity. any advice would be greatly appreciated.
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
Unit 2 raise to $895.00 in 6 months raise to 950.00
Unit 3 raise to 875.00
Unit 4 raise to 875.00
3 & 4 in 6 mo raise another 50 to 75 bucks,without any improvements unless vacated.
The first to go rehab and up to top market rate.
Keep them all on month to month. once you know your tenant base.. you have more control and then if you want to change lease terms you could consider it. but for now I'd keep them all on month to month.
My family's had rentals over 50 years and now are mine, we only have done month to month, at the most I would do is guarantee rent rate for 12 months at move in but month to month is way to train and keep your tenants trained. You think you have security with a year lease but in reality people will do what they want and leave, move, fight your terms, and in the end a month to month term with 60 day preferred notice is way to go....
Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
9y
Unit 2 raise to $895.00 in 6 months raise to 950.00
Unit 3 raise to 875.00
Unit 4 raise to 875.00
3 & 4 in 6 mo raise another 50 to 75 bucks,without any improvements unless vacated.
The first to go rehab and up to top market rate.
Keep them all on month to month. once you know your tenant base.. you have more control and then if you want to change lease terms you could consider it. but for now I'd keep them all on month to month.
My family's had rentals over 50 years and now are mine, we only have done month to month, at the most I would do is guarantee rent rate for 12 months at move in but month to month is way to train and keep your tenants trained. You think you have security with a year lease but in reality people will do what they want and leave, move, fight your terms, and in the end a month to month term with 60 day preferred notice is way to go....
Professional · Grants Pass, OR · Member since 2016 · 89 posts · 77 votes
9y
First off, you should absolutely get your new tenants to sign a lease agreement with you, especially for the month-to-month renters.
I would ease the month to month tenants into a rent increase, as in, give them a 60-90 day notice that it is going up.
For unit #2, let them know that due to inflation/taxes/etc., rent is going up to match market rate for the area. You can either raise the rent by $100 (12%) at first. Or raise it by $50 this year, and another $50 next year to get it to the $875 target. The flaw in the latter plan is that you may need to raise it by more than $50 next year if market rental rates keep increasing.
If the previous landlord didn't raise the rent on them, they must be expecting a rent increase. And if they can't afford the new rental rates, you are better off finding new qualified renters you meet your income requirements.
After this, I would suggest building regular rent increases into your lease agreements. Keep them small at $10-$20 per year. A small increase like this wont scare away current tenants but will prevent you from having to do a $100 increase in 5 years, which could price a rental out of someone's budget.
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
9y
We try to split the difference between market rent and current rent. So unit 3 would go to $825, for example. We do this process each year. Give plenty of warning or step the increase over a few months if it is a big leap. This rewards good long term tenants but also keeps you moving toward market rent. Be sure you are right on market rent, though; if you overestimate they will find a cheaper place. If you are indifferently about doing the improvements now or later, consider asking them if they want the upgrades (and higher rent). If you can do the work while they are living there you'd have less future vacancy, and they are even more likely to stay.