How Realistic Is It to Raise Rents $100+ on Existing Tenants?

Question

How difficult is it actually to raise rents on existing tenants?

I’m looking at out-of-state small multifamily deals, and I keep hearing from agents that a property can be a solid deal if you can increase rents by $100+ per unit.

But I’m wondering how realistic that assumption is in practice.

For example, if a 4-plex has rents that are $100–$200 below market:

• How difficult is it to raise rents on existing tenants?
• Is it usually better to wait and raise rent when a unit turns over?
• How often do tenants actually accept a $100+ increase without leaving?
• When underwriting a deal, how much of the projected rent increase would you actually count on?
•

How difficult is it to raise rents on existing tenants?

Is it usually better to wait and raise rent when a unit turns over?

How often do tenants actually accept a $100+ increase without leaving?

When underwriting a deal, how much of the projected rent increase would you actually count on?

I’m especially interested in hearing from investors who have actually done this, rather than just what agents say is possible.

Drew Sygit · Answer

Why aren't you asking why the seller hasn't raised rents?

Let's see if we can brainstorm some logical reasons:

1) Lazy seller - good news for you!

2) Rent actually matches the property condition - so, you'd have to improve the property to justify charging higher rent

3) Tenants are on S8 and at the local max S8 rent - you'd have to replace them with cash-paying tenants (also RentReady the units)

4) The extra $100 is a mirage the listing agent is dangling to sell the property - how are YOU validating their claims?

Chris Seveney · Answer

Every answer should be "it depends." If they're paying $2,500 a month, an extra $100 is a 4% increase. Most likely not that big of a deal. If your monthly payment is between $700 and $1,100, then $100 a month will be a big deal for these people

Divin Kanyama · Answer

@Parker Davis From experience owning rental properties, raising rents on existing tenants is possible, but it should never be treated as automatic simply because an agent says the units are below market. The outcome depends on the lease terms, local notice and rent-control rules, the condition of the property, the size of the increase relative to the current rent, and how much comparable housing is actually available. Good tenants may accept a $100 increase if the new rent remains competitive and the property is well maintained, but some will leave—and the cost of vacancy, turnover, and an uncertain replacement tenant can quickly offset the additional rent.

I generally prefer a measured increase at renewal rather than waiting for turnover, especially when rents are significantly below market. Smaller, predictable adjustments are usually easier for tenants to absorb than one large catch-up increase after several years. For underwriting, however, I would use the current in-place rents at acquisition and treat future increases as upside until they are legally available and supported by verified comparable leases. I would also model a downside case that includes slower increases, at least one vacancy, turnover costs, and needed improvements. If the deal only works after immediately raising every unit by $100–$200, it is probably too dependent on an assumption the current owner could not achieve—or chose not to test. Buy based on today’s income, then create value through compliant increases, better operations, and natural turnover over time.

Henry Lazerow · Answer

I do it every year. If you are in a high demand area it is very easy to raise rents, just send a nice note saying it is still slighly below market, etc. I often provide Zumper rent data and price $30 or so lower then local comps to motivate them to stay. When tenants do occasionally leave, we usually have multiple applications first 2 weeks not a big deal. It is all based on area. I had another building in a bad area and that place I was always scared to raise rents as it was so hard to find paying tenants, thankfully sold it.

Richard F. · Answer

Usually if the rents are that far below market there is a clear reason...either an owner that is afraid of losing the "good" tenants, or a property that is notably sub-par for the market.

Raising rent, local legal restrictions notwithstanding, is simple and should be one of the first steps you take upon acquisition, at the earliest lawful point. Sure, you need to consider market timing, available tenant pool, and actual property conditions.

You are running a business, correct? Does the local grocer keep prices low so not to offend or cause hardship to customers? Does the gas station hold their prices down? No, and no. Only weak rental managers do this. Reevaluate every year by reviewing conditions, market, tenant finances, and inquiring of tenant's intentions.

Whether you just waited to long, or just acquired the property, immediately inspect each unit to determine actual condition and housekeeping of current tenants. Obtain a completed rental application from each adult. Evaluate, by walking through, nearby competition and reassess your pricing. Evaluate the DTI ratio of the tenants. Depending on remaining term of each existing tenant, and depending on what is needed in terms of rental prep, provide adequate reasonable and lawful notice of your plans. If the unit needs updating, this is simple, you will be renovating and can be more flexible on a move date, charging only for days occupied. If the unit is actually great, but the tenants not so much, if their application does not pass, simple...they do not qualify for the planned rent increase. Allow for additional time for these folks to relocate...60, maybe 90 days, or even wait for spring or end of school year, whatever will make it easier for them, while not leaving you standing in a snowdrift.

If market has truly not moved, or moved downward, without some artificial catastrophe like covid, then you don't make an adjustment that one year.

Jeremy Greenamyre · Answer

Realtors are trying to sell you something. If raising rents was that easy, why didn't the current owner do it?

Is the $100 increase a 20% increase, or a 3% increase? That seems like an important distinction.

Our company's rent increases usually following the following guidance:

1) Increase every renewal. It reminds the tenant that costs increase and gets them in the habit of expecting an increase.

2) Use third-party info as guidance/justification - property taxes, CPI, etc.

3) Do the big increases between tenants.

Note: We are in a very mature market with class B and C properties. All markets are different.

Geo A. · Answer

As much as I hate saying this but "it depends".

It depends on the market, the tenant, inflation, condition of the property, etc. ..

I've historically raised the rents to meet at least inflation or promised an upgrade (e,.g. kitchen upgrade while they're on vacation ) to make it up for them but I have certainly lost tenants b/c of it which costs me much more in turnover costs, agent fee, and vacancy. I think it doesn't hurt to ask but it should be a conversation not a forced increase

Diana Khan · Answer

@Parker Davis, I’ve worked with landlords who bought properties with the same “below market rent” story, and I would not treat that $100 or $200 increase as real until I looked at the tenant files.

Before closing, I’d want to see the signed leases, renewal dates, rent history, security deposits, any amendments or concessions, and whether any tenants are receiving rental assistance. I’d also want to know when an increase can legally take effect and what notice is required. Sometimes the market rent really is higher, but the lease timing or tenant situation means it may take longer to get there than the deal sheet suggests. I like that you’re questioning this before buying because I would rather underwrite the property on what it earns today and let the rent increases become upside once you know they are actually available.

Jay Hinrichs · Answer

rents are soft all over the US I would be very reluctant to raise rents.. I know on the few SFR rentals I had .. when the lease was up I had to actually lower rent and by a lot.. I think you will find that tenants will just up and move when you do that at least in mid level type rentals or lower dollar amounts where 100 a month is a big deal and with the soft rental market you might find your self vacant for a few months and how long is it going to take to recoup the 2k or more you just lost because you tried to raise rents.. thats the other side of the coin.. And really depends on market you are also vunerable in C class and below to theft when vacant.

Davon Murphy · Answer

I remember a property manager tried to raise $100 specifically on the unit I was in for a studio priced at $1800. I was mad.

How Realistic Is It to Raise Rents $100+ on Existing Tenants?

How Realistic Is It to Raise Rents $100+ on Existing Tenants?

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