Closed on a 4plex, what would you do to get the rents to market?

[Daniel Zapata]

Hello BP!

I just closed on my first 4plex in West Sacramento this week, which is fully occupied, but every unit is renting for way below market (~$250-$350 less).  This is the breakdown:

1. 3 tenants on month to month leases, one is on Section 8
2. 1 tenant has a lease until the end of July and is on Section 8

After consulting with a couple of people and doing some research, it sounds like anything over a 10% raise in rent will require 60 day notice (all of these units fall into that category).  For Section 8, they require rent raise approval and there is a 60 day period for that as well.

These are the options I'm currently exploring:

1. Do the proper notice on the 3 month to month units asap, bump the 4th unit to market at the end of the lease term.  There is a risk of the 3 units turning over at the same time and also losing the 4th tenant.
2. Stagger the increases, starting asap, so I only risk losing one tenant at a time.  This way, I would likely only lose 1 tenant at a time, max.
3. Bump every unit 10% now and every year after that until the rents are at market (~2-3 years at the current market). It doesn't cashflow at the current rents, but I shouldn't be out more than $100-$200/month in the first year.

If this were your property how would you proceed? Are there other options I haven't considered?

Thanks,

Danny