To Raise or Not To Raise Rent

[Mario Morales]

I just closed on a 3 unit, commercial unit on 1st floor locked into a lease. 2nd and 3rd floor units are grossly under market price. $600 and $700 accordingly 2 bedroom units. At these prices, I will barely break even. Market rent is $1200 for 2 brs. I want to explain to both tenants, with the binder method, that I need to raise the rent to $1000 and $1200, accordingly. As one unit is in better shape than the other. Any advise would be appreciated. 

[Ross Y.]

@Mario Morales

I’ve lived this scenario and it didn’t go very well when I let the tenants know I was raising their rent by 40%.

I tried to reason with them, etc. turned into a bit of a mess. Nobody will be happy about this and you’ll have a pissed off tenant that won’t help you with ANYTHING.

I should have known!

As they say, hindsight is 20/20... so

I would have approached them stating that I wanted to perform renovations to the place and asked them to leave with a 30/60 day notice and offer their full deposit back so long as they don’t damage anything on the way out. Take video!

Follow that up with a letter/email, and move on with new tenants. Rental markets are hot right now!!