Raising Rent on Inherited Tenants?

Question

Hi All,

I have a two-unit property under contract right now that is set to be inspected in the near future. Baring any major repair requirements, I expect the deal to go through. Both units of the property are currently rented out; however, the rents are significantly below market, as one tenant has been there for 23 years and the other has been there for 6 years. The rents currently total $1,860, whereas market rate should be closer to $2,300 or $2,400. I don't want to be the new landlord who hikes the price on reliable tenants, but I also want this property to rent for what it should. Has anyone out there inherited tenants, and if so, did you raise the rents at all? If you raised the rents, did you do it incrementally or in one jump? For reference, the unit with the 23-year tenants is rented for about $300 below market rent (tenants are month to month), while the 6-year tenant is rented for about $200 below market rent (lease expires 03/2020).

Thank you all for any insights.

Kyle P. · Answer

@Corby Goade

Great insights, Corby. Thanks for reaching out and for your helpful info!

Corby Goade · Answer

You can't raise the rents on the on the one that expires in March until then, so you can work on that. The one that is month to month will likely require 30 days notice. I've done it both ways, but it's likely to come down to whether the tenants can stay (either because they can or cannot afford an increase) and if you want them to stay.

If you want them to stay, I'd be flexible- I certainly don't want to be the person responsible for someone living on the streets simply because I wanted another $300 per month. I had a similar situation this year and the tenant simply couldn't afford another penny. We let them go month to month with the stipulation that we would be working together to find them appropriate housing. We worked with the tenant, section 8 and the new landlord to make sure it was a win/win for everyone.

I've had tenants in this situation tell me they could afford market rents and were grateful that they got to pay such low rents for such a long time. If they're good tenants and want to stay but have limited means, I'd probably bump the rent incrementally by $75 every quarter until they got there.

Best of luck!