Rental Property Investor · RI · Member since 2018 · 3 posts · 3 votes
I'm looking into purchasing a 6 family apartment in Providence. RI. The potential for cash flow is high, but the rent is currently well below market value by almost $300 per unit. All units are currently rented out (2 bed/ 1 bath). Additionally, most of the tenants have been long-term residents. What would be the best way to go about raising rent?
Give notice based on your state landlord tenant regulations prior to their leases ending. Ideally leases will be staggered, if they are on M2 you could stager notices over a 6 month period. Let them know that rents will be raised to market and be prepared for some push back. Some may decide to move but as long as you are at market they will likely not have anywhere less expensive to move to. Purchasing a property will usually result in some vacancies so be prepared.
Ideally you will be able to do some upgrades and push rental rates even higher.
Some new landlords opt to raise rents slowly over time but all this does is cost you more over the long term than having some tenant turn over. Cleaning house is financially smarter and the reality is they may not all move which is a win/win.....fill market, no reno expenses.
The fact that they may be long term tenants is irrelevant to your business aside from the fact that they may be more inclined to stay even facing full market rents. Their reluctance to move is to your advantage. If they can not afford market rent it is best they leave sooner rather than later.
Give notice based on your state landlord tenant regulations prior to their leases ending. Ideally leases will be staggered, if they are on M2 you could stager notices over a 6 month period. Let them know that rents will be raised to market and be prepared for some push back. Some may decide to move but as long as you are at market they will likely not have anywhere less expensive to move to. Purchasing a property will usually result in some vacancies so be prepared.
Ideally you will be able to do some upgrades and push rental rates even higher.
Some new landlords opt to raise rents slowly over time but all this does is cost you more over the long term than having some tenant turn over. Cleaning house is financially smarter and the reality is they may not all move which is a win/win.....fill market, no reno expenses.
The fact that they may be long term tenants is irrelevant to your business aside from the fact that they may be more inclined to stay even facing full market rents. Their reluctance to move is to your advantage. If they can not afford market rent it is best they leave sooner rather than later.
Rental Property Investor · Monroe, WA · Member since 2018 · 177 posts · 98 votes
7y
I suggest confirming your state laws and staggering the rent increases and lease extensions. You can expect as a new owner that some of the tenants requests for repairs are going to initially be increased. Use this as an opportunity to address some over due concerns, show them you care and get inspections on each unit so that you can systematically start to increase rents based on the condition of the units! Best of luck.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
@Hayley Bartlett
To add to what Thomas said; evaluate the units to determine how much work they might need to rerent units. If very little work, I’m ok giving 30-60 day notice to all tenants ASAP. But since they are long term tenants, there is probably more work to be done.
You also need to be honest with yourself on what your budget is. Will it be bad if half of them decide to move right away? I’m always a fan of getting up to market rate as fast as possible. $300 below market rate? $1,800 a month? $21,600 per year?!?! Raise them rents!