Need Recommendation on Raising Rent

[Jeff Marciniak]

BP Members, I have a property under contract and will be closing on it November 2nd. The current tenant historically fell behind on their rent, and would catch up every year with their tax returns. The current owner self managed, and obviously didn’t have this tenant trained in well to make rent a priority. The rent is currently $1000/mo. vs. $1200/mo. market value (based on onlIne ads), which is conservative for a 4 BR house in St. Cloud, MN. The lease is month-to-month. I’m looking for a recommendation on how to increase the rent. Do I raise rent immediately to $1200? Do it in increments? My thoughts are to get them on a 6 month lease in Nov. at $1100/mo, and then start an annual lease In June, whIch Is a more favorable tIme to fInd tenants vs. the wInter In MN. Raise rent to $1200 in June ‘19. I look forward to your recommendations.

[Thomas S.]

I would give notice to non renew and find a good tenant that can afford full market rent. It is a mistake to keep this tenant and even a bigger mistake to have them sign a term lease. There is no logic in putting any tenant, let alone a bad one, on a term lease. It will not insure they will pay rent and you will likely be forced to evict rather than non renew a M2M lease.

Keep in mind a term lease has no bearing on when tenants decide to move. They will break a lease without a second thought.