I am in the process of purchasing a 4 unit apartment complex. The rent is below the market average by $65 per unit except for one.
All four units are MTM and have long term tenants. The current owner pays gas, water and trash. How quickly can I raise the rents? Do you do it in increments or do you do it all at once? As far as the utilities I supposed I have the same question. Can I have them spilt the utilities right away or should it be in increments as well?
I don’t know the tenants but it’s nice to have long term tenants there. Have you had good experiences with long term tenants or is it better to start fresh. I’d love to hear your experiences and receive any and all feedback.
@Kim Herrick If you can have them pay their own utilities or start by just adding them one at a time it is the same as raising the rent and will increase your bottom line.
Does each unit have separate meters for electricity and water? If so this one is a no brainier. If not what would it cost you to convert to separate meters? Then see what the payback is on the cost of adding these meters.
I wouldn't do anything drastic, do smaller increases to keep from running everyone off at the same time.
This answer all depends on your property. If you can have qualified people lining up at the door to rent the place at market, then yeah, this is a business, not a charity. Do what you have to do. Raise the rents (to the extent you can do so legally), and if your tenant doesn't bite, find a new one.
But if this is an area that's hard to fill with qualified tenatns, you might be better off working with the long-term tenant to gradually raise the rent over time.
And of course this goes over a lot easier if you add value first.
I went the latter route with a property recently. I bought a 4-plex in September 2015 in a rural location. There was a long-term tenant in a unit paying $995/month. I added value, fixed a couple of her pain points (rodents, leaky roof), and then got her to sign a 2-year lease, the first 12 months at $1,040 and the last 12 months at $1,200. She agreed.
But of course your mileage may vary.
Thank you @John Underwood for your response. Unfortunately the utilities aren’t separated. Would I contact the electric company and water department to get them separated?
I was concerned about them leaving. I don’t want to come in and change everything they seem happy and pay on time.
@Logan Allec this property is also in a rural area. A college town to be exact. The tenants are not college students but I could go that route if need be collect higher rent but there would also be more turn over.
I was thinking about adding laundry to the facility. There is a dryer but no washing machine in the unit. That’s a great point to add value before raising the rent. I’ve seen weekly leases recently. So it is easier for the landlord to get the tenant out if they don’t pay. Is that something you’ve seen?
Hi @Kim Herrick , sorry, I don't know much about weekly leases!