How to Deal With High Rent Raising

Question

New landlord here, just bought a two family and will be house hacking by living in the 2BR unit and renting the 3BR unit.  The house is coming with a tenant already in the 3BR unit who's been there for about 5 years, and has been paying a rent that is far, far below current market value (about $1,000 to $1,100 under).  The owners cut him a heavy deal because they're off site and he'd do maintenance around the house, and the owners had the house for a long time with it being paid off.

I do not want to charge such a low rent, but I also know that anyone who's told, "Hey pay me $1K more per month" will leave.  I actually only want to charge $550 more, but that is still going to be a tough pill to swallow.  My biggest concern is this guy will just squat and I'll have to evict him, which in MA I know is the worst state for this.  I'm not sure what to do in this situation?

Samantha Klein · Answer

He must be on a month to month lease correct? Since he's so far under market rent, I would just give notice to vacate. He's a long term tenant because his rent is really low compared to the market and he's gonna think your the greedy landlord if you raise rent that much so I would just start with a new tenant at market rent. It would be a difficult story if he was only $100 under market.

David Santore · Answer

Yeah I'm kind of leaning towards this move.  I feel like even if this guy did pay....that would leave a bad taste in anyone's mouth, it's too much too fast.  He'd probably be a less cooperative tenant as well.

Stephen Nava · Answer

You bought the property expecting to make a great return. As long as the unit is in great condition, I don't see why you only want to raise the rent by $550. Make a business decision and bring the rent to the market value. Figure out how to make this transitions easy for all parties involve. Talk with the tenant, explain why you are increasing the rent by $1000, and see if he accepts the rent adjustment. If not, offer to help him move or find another unit close by. You might have to go through the eviction process and that would be a challenge. The longer the tenant stays, the more money you lose every month. That's $12,000 a year!