Raising rent on owner occupied property
Hi all,
Long time lurker, first time poster. Just closed on my first multifamily deal (owner occupied) and there are existing tenants. They have an incredible setup, complete with the "nicer" unit in the home, central air, and an attic full of storage. Market rent is ~$1,200 for comps without storage and central air. They really have a SWEET deal.
Their rent is $950, or $250 below market rate of $1,200. Rent has to go up when we take ownership, but how much? They are month to month, and have been in this unit for 2 years without expressing interest of leaving. Landlord mentioned they are some of the best tenants hes had (prepaying 3 months in advance upon traveling, always on time, quiet and respectful, meticulously maintain their unit).
Most Popular Reply
When I price a rental, i do a zillow search for other rentals in one of my properties neighborhoods, I tend to keep mine at the cheapest of all other available comps with the same square footage, bedrooms and baths.
Why?
There is a lot to be said for keeping rent affordable for GOOD tenants. You could shock them with a huge increase, cause them to move and then you would need to pay to flip the property for the next tenant, lose rental income, and perhaps pay realtor commissions if you go that route. I would imagine you are also responsible to return the original deposit.
I would do it slow and gradual if you get the vibe that they aren't looking to leave any time soon. But if you shock them with a huge increase, it may be something they can't immediately afford and you lose them.
I'm generous with good, stable tenants... and I have found it ALWAYS pays off with longevity.