I agree that you cannot always raise rents year to year to move steadily with inflation. Inflation is an average and our economy has unpredictable good years and bad years that can be amplified by local economic trends. Raising rents can be tricky because if you go too far, you have vacancies that cost time and money. Trying to squeeze an extra $25 here and $50 there in this particular price point can drive away good tenants and cost a month of rent that negates the benefit of the increase for many months. In my opinion, it makes sense to keep rents in line with your competition and even undercut slightly to keep the good ones. I try to only raise rents through attrition and/or to keep pace with an increase in taxes or insurance. The beauty of raising the rents when a tenant moves out is that if you are given the proper 30 day notice, you can raise the rent to test the market reaction for a couple of weeks where you are not vacant. If you are dead in the water price wise, then you have the opportunity to drop the price to a level that the market will bear before you have a vacancy. To me, it seems that the ROI for this is strong enough where you do not need to start raising immediately, unless you are well under market with rents, which it sounds like you are not. When someone gives you notice, raise the rent in your ad to see what kind of activity you get. Now, if you start seeing similar competing units renting for $750 and $800 and so on, then it's value add time.
Heating, Cooling, Water are paid by the tenants. There are 6 separate gas, electric and gas meters. Only sewer is paid by the owner, but they collect sewer bill with the rent. It's in the lease agreement that was provided to me.
Seller accepted some other buyer's offer. Two days ago, I got the call from the seller and said they would take my offer as a back up offer, but they will NOT pay my closing cost. I accepted it and now waiting for the first contract, if it falls, I will get this property.
Real Estate Broker · Mount Olive, IL · Member since 2013 · 1k+ posts · 310 votes
9y
Welcome BP Members,
Update:
Seller will NOT pay my closing cost. So, I am buying the building for $165,000. Last week property inspection report revealed many issues. Two are big ticket items:
Two Broken Rafter in the attic place
3 federal pacific electric panels (circuit breaker box)
Have obtained some estimates cost is about $12,000.
Should I ask the seller for credit or have Seller repair it?
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
You need to decide if you're bluffing when trying to get the Seller to either lower the price or pay for those repairs. What WILL you do if they say "no"? Sure you can ask - but can you force?
If that extra $12k IS a deal-breaker - are you really prepared to walk away and not look back?...
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
I didn't raise rents willy-nilly either. I made adjustments at move-out time, if-and-only-if the FMR would tolerate it. My 6-plex was a niche market of blue collar families and by being astute to FMR, I avoided vacancies and got them filled easily when they did occur. Vacancies and move-out costs can kill your ROI quickly. Hang economic theory - - I operated in the real world.