Bringing up rents to market value portland

5 Replies

Hi biggerpocket friends!

After spending a year researching and learning about real state I finally pulled the trigger and need help trying to figure out what to do with a property that I just got into contract in the portland SE area. The property is a 16-plex with 1br rents undermarket, at least 5 units are on the 600-650 range when the market rents should be on the $900 ballpark. What is the best way to bring rents to market value? Should I give tenants notice to vacate, or just send a notice of rent increase?

Also, should I do it myself of hire a property manager (recommendations)? I'm an out of state of investor so I'm more inclined to have a property manager.

Thanks in advance for any advice!

Hire a PM. For a 16 unit you should be able to afford it. I would also wait until the units become vacant, and then make the necessary updates to bring them up to market rate.

@Eduardo Bravo ortiz Lots of information to unpack to make that decision. First being condition, price/terms, timeline and relocation fees.

In my opinion turning a property around like that without property management is taking on a large bite. Combine the fact that you don’t have local boots on the ground and it is too big of bite to chew.

We’ve got a lot of experience in this area. Happy to chat if you want to PM me. We’ve turned around a 9-unit, 8-unit, and 15-unit like that in Portland this year.

In my past experience I would suggest to always try and keep the current tenants. That means you are keeping the current revenue coming in. I would then start adding value to your property and show them that you are making improvements and making their homes a nicer place to be. Then I would take the problem tenants and increase them first. Because you want them to either pay or you want them to leave. But you do not want a mass exodus of people because I have been on the wrong side of cashflow and while in theory it is great to start from a clean fresh slate. The sleepless nights I had were not ideal. Add value then add rent increases, turn the good tenants into raving fans and offer a discount on rent if they refer someone and that person passes the background check. This way you get a good culture in your complex.

Originally posted by @Eduardo Bravo ortiz:

@Benjamin Maciel Thanks for the advice Benajmin, part of the challenge is that if I give them notice to vacate I will have to pay relocation costs and that will eat this years cap rate

@Neal Collins Agreed, doing this by myself would be extremely hard, hence I'm more keen to go with a property management company. I will PM you so we can chat.

@Steve Rozenberg That is one of my concerns too, I don't want to end up with a mass exodus, but rather something more incremental even if it takes a few months. I like the idea of a discount for good tenants, great advice. thanks 

Neal would the new landlord cant raise the rent a certain amount rules come into play.

also when I had that lunch with the lady from the DRE she was mentioning something about needed a PM license if you owned the property in a LLC and were self managing.. I really did not go into it much as we were diving into the illegal wholesaling stuff she wanted to talk about..