Should I raise the rent?

7 Replies

Hey guys! I am a new investor and just purchased my first Duplex in Metro Detroit. Currently the top unit is leased for 10 more months at $550 and $25 for water (I pay for water) and tenant pays heat/electric. The bottom unit is still occupied by the previous owner who is moving out in about 10 days. I was told my the previous owner & by my real estate agent that the bottom unit would rent for about $795. With my $865 PITI, I'd cash flow about $430ish before factoring in expenses. So today I was getting anxious and just wanted to put some feelers out in the market so I listed the property for rent even though I can't do showings until the current owner moves out. I noticed other similar houses were going for more and looked worse. I listed it for $900, $105 higher than the suggested price. In about 5 hours, I had received 60 messages from people asking about the property! I told everyone I can't show it for another 10 days or so and it wouldn't be ready till the end of the month. My question is... Should I raise the rent a little more to bump up my potential cash flow? Has anyone had success doing this? Since the upper unit tenant has been using the previous owner's wifi and doesn't have internet, I was thinking of having internet installed for $40/m in the bottom unit. I could then charge the upper unit tenant $25-$30/m for wifi and that might be the extra incentive to charge $1000 for the bottom unit. Curious to get everyone's thoughts! Thank you
@Matthew John not sure why my post becomes a big blog of text when I submit it. I formatted this with multiple spaces so it was easier to read. Sorry guys :( Hope I can get some feedback
@Matthew John One of the things that I always like to do in that position is in crease it and if you find a really good tenant (after screening, and checking everything) offer them a small yet significant discount if they are willing to sign a 2 or more year contract. This is very convenient, in my opinion, because it helps you insure that you will have passive income for a longer period of time. Plus if you think about how much it cost you (lost of rent, fees,...etc) for the time of vacancy between tenants it definitely makes up for it in the long run. Thy key is not go low enough to temp the tenant, yet stay as high as possible, where you still have. A good cash flow. I did that on a unit 2/2 that I could have rented for $900/month, and if the tenant signed a 2 year lease I could do it for $850/month. The tenant has been there for 3 years now, he keep the unit spotless, and always pays in time without any issues what so ever. In a yearly basis it only cost me $600 less than the rent. I made that by not having any vacancies.
@Allan Calderon wow I didn't think of that! Great idea!!! Thank you for that. What do you think of installing internet and using that as leverage? I can get $25/30 more from the top unit and also might be able to justify the increase in the bottom unit from $900 to $1000

@Matthew John How many of those messages are asking to tour the property? In my experience when there are many people asking to tour the property that means the price is right, or is too low and can be increased. I would need to run comps to be sure of this, but from what you mentioned I would say a price increase is not out of the question.  

@Andrew Frowiss There are not many houses on the market for rent in my area. Most are about $900, but are in a worse area and don't look as nice. Many people are asking to schedule to see it and even want to put applications in before so! I am thinking a minimum 2 year lease at $1000 and possibly adding internet for both units to share.