Raising Rent on Inherited Tenants

[Kelvin J.]

If I purchase an occupied property but their current rent is below market is there a correct way to raise the rent on the inherited tenant to get up to market and increase my cashflow without overt risk to occupancy? I suspect there isn't a one size fits all answer here but I am curious what thoughts or strategies you folks have had in these situations. I don't have a specific scenario in mind and this isn't something I am currently going through. Purely hypothetical.

[Kenny Dahill]

@Kelvin J., the correct way is following the lease agreements that are currently in place.  You have to wait until that lease ends to adjust any rents.

It depends how much you are increasing rent by.  If we're talking $50-100, sometimes it's easier to pay than move.  If we're talking $200-500, that's a shock to anybody.

For small increase, just inform them with at least 60 days notice.  Communicate why their rent is increasing.  An easy reason is always property taxes went up.

For a large increase, be honest with the reasons.  The previous landlord probably had a significantly lower mortgage.  With your mortgage, it does not financially make sense.  If you really like the tenant and they can afford the large increase, a ramp is always a nice offer.  Consider an 18 month lease: 6 months of ramping and 12 months at the new level.