Best way to go about raising rent?

Question

So I have a two flat that I've owned a little over a year (first property) and we inherited a good tenant and immediately re-signed a lease with him that runs October through September, so it's ending toward the end of next month. His rent is definitely under market, so we have to raise it due to rising expenses, but we don't want to raise it enough for him to leave (unless he's planning on it anyway; we want to have our game plan in place before discussing). Do you guys typically go by percentages or just keep it around market average based on the property? Also, how much notice do you give before raising rent? I know you have to give two months notice if they have to be out, but I couldn't find a specific law about rent increases. Thanks!

Jake Rittenhouse · Answer

I have same issue and wondering what to do with inherited tenant and how much to raise their rent, but on building just purchased. Tenant has no lease and paying half of average rental for area.

Greg Scott · Answer

Of course, you must honor the terms of your lease as it is a legal contract.   Most leases have a clause about how many days a landlord has to give to notify the tenant  the lease will not be renewed.   If there is no notification, most leases convert to month-to-month.     Once you are month to month, you can really change it any time with 30 days notice.

Now most people will want to give the tenant a few extra days to think about things, but you are basically giving the the option to sign a new lease or move out.

One of my property managers also uses an incentive to get them to sign, rather than drag things out.  He notifies the tenant that if they choose to stay month-to-month their rent will go up $100/mo but if they sign the new 12--month lease, the rent goes up only $25/mo.  That can actually be beneficial for both parties.  If the tenant wants to stay 2 more months and then leave, they aren't forced to leave early or lock in a 12 month commitment.