New to Rental Property: Rent Increase Situation
Investor · New York, NY · Member since 2020 · 24 posts · 11 votes
Hi everyone,
My name is David and I purchased my first rental property last month, in the Chicago area. I am out of state and am doing business with a property manager over there. Things have been going smooth with them. They just conducted their initial walk through and the tenants seem to be taking care of the property.
The current tenants had some frustrating experience with the last property manager and have been a little bit defensive with some of our requests. But lately, it's been going well overall.
My property manager wouldn't recommend increasing the rent as the current tenant's lease is ending at the end of the year, and they would like to go month-to-month as they might move to Texas in early spring.
What would be your recommendation for a new real estate investor?
I am thinking that for now, if they are paying their rent, and not trashing the property, it's what I'd want.
Just as a side note, I under estimated the property taxes in the area and won't have much cash flow on the property (below $40 a month after reserve).
Thank you! And nice to meet your all! Happy to be here!
David
If the tenant is willing to stay for awhile longer MTM, it may be worth it as Winter can be difficult to find a tenant. Better to have someone paying rent (even if slightly below market) than an empty unit waiting 'til Spring.
You can increase their rental after the lease is over.
Hi everyone,
My name is David and I purchased my first rental property last month, in the Chicago area. I am out of state and am doing business with a property manager over there. Things have been going smooth with them. They just conducted their initial walk through and the tenants seem to be taking care of the property.
The current tenants had some frustrating experience with the last property manager and have been a little bit defensive with some of our requests. But lately, it's been going well overall.
My property manager wouldn't recommend increasing the rent as the current tenant's lease is ending at the end of the year, and they would like to go month-to-month as they might move to Texas in early spring.
What would be your recommendation for a new real estate investor?
I am thinking that for now, if they are paying their rent, and not trashing the property, it's what I'd want.
Just as a side note, I under estimated the property taxes in the area and won't have much cash flow on the property (below $40 a month after reserve).
Thank you! And nice to meet your all! Happy to be here!
David
We think of our properties as assets that are expected to throw off a required amount of cash. If an asset isn't producing the cash we want, even if it's a new asset, we analyze what we need to do for that asset to produce the cash we want. If the rent on a unit is low compared to the market, we assess how long and what will it cost us to get a new tenant in a unit. If the numbers are favourable then we execute the plan.
So, is the $40/month cash flow acceptable? Let's say it's not & $100/month is the target. If the property/unit is vacated, what's the average days on market for property/units such as yours. If the days on market are long then maybe you put up only making 40/month until this tenant moves out. If the days on market are short then maybe you give the tenant an option of going Month To Month at a higher rent or give them notice & move someone else in. Use data to drive your decision.
I think this is a very good way to see it, thanks Crystal! How would you able to get this statistics? I haven't been able to look anything up.
I'm a licensed realtor with access to Illinois data. When working outside of our market we use services like rentometer or Zillow rental.... or we hire a realtor.
Hi everyone,
My name is David and I purchased my first rental property last month, in the Chicago area. I am out of state and am doing business with a property manager over there. Things have been going smooth with them. They just conducted their initial walk through and the tenants seem to be taking care of the property.
The current tenants had some frustrating experience with the last property manager and have been a little bit defensive with some of our requests. But lately, it's been going well overall.
My property manager wouldn't recommend increasing the rent as the current tenant's lease is ending at the end of the year, and they would like to go month-to-month as they might move to Texas in early spring.
What would be your recommendation for a new real estate investor?
I am thinking that for now, if they are paying their rent, and not trashing the property, it's what I'd want.
Just as a side note, I under estimated the property taxes in the area and won't have much cash flow on the property (below $40 a month after reserve).
Thank you! And nice to meet your all! Happy to be here!
David
We think of our properties as assets that are expected to throw off a required amount of cash. If an asset isn't producing the cash we want, even if it's a new asset, we analyze what we need to do for that asset to produce the cash we want. If the rent on a unit is low compared to the market, we assess how long and what will it cost us to get a new tenant in a unit. If the numbers are favourable then we execute the plan.
So, is the $40/month cash flow acceptable? Let's say it's not & $100/month is the target. If the property/unit is vacated, what's the average days on market for property/units such as yours. If the days on market are long then maybe you put up only making 40/month until this tenant moves out. If the days on market are short then maybe you give the tenant an option of going Month To Month at a higher rent or give them notice & move someone else in. Use data to drive your decision.
I think this is a very good way to see it, thanks Crystal! How would you able to get this statistics? I haven't been able to look anything up.
I'm a licensed realtor with access to Illinois data. When working outside of our market we use services like rentometer or Zillow rental.... or we hire a realtor.
Sounds good, thanks Crystal!