All Forum Posts by: Imran Patel

So...  I met with the tenant and had a nice chat this week.

Ultimately I raised the rent by 200/month to 1050, which is still about $100 less than the lowest advertised rate on the market.   

I'll be refinancing the unit later this summer, so I'll use some of those funds to update the unit to be able to charge a much higher rent, and the remainder refinancing funds will be my downpayment on a couple of more units.  This is getting exciting!

Thanks everyone for your inputs, your feedback was truly truly helpful.  

#BiggerPockets_Members 

#Extra_$2400_per_year

Hi All,

I am looking to raise my rent by a significant amount and need some feedback from the community.

Here's the situation:

This is my first investment.  I bought it in Jan 2016, a 2bdrm/1bath condo in Chicago's north side for 75K.   I had to purchase all cash because I am a Canadian on a US work Visa so Banks won't give me loans yet.  I need to build my credit history starting with secured credit cards, work up to unsecured cards over the next few months before trying to qualify for mortgages with US banks later this year.  

Back to the topic at hand: rent increase!

The old landlord had a "long term tenant" who still lives there now month-to-month, but there was no proof of past leases or rent amounts provided at closing.  I was told verbally that the tenant pays $850/month and is willing to stay.  This tenant has been very well behaved and has been making timely payments, usually a week early, possibly because he's getting a great deal.

Due to the fact that I am not financing the property and own it outright, this property would always cash flow until I am ready to refinance.  Obviously, I do want to maximize my returns, so I looked up rent rates in the area on multiple sites, and they are in the 1150 -1500 range depending on the condition of the unit.  Even if I consider bumping up to the $1100  range, that's a 30% increase in rent.  A quick google search indicates that there may not be a limit to how much I can increase the rent:

Excerpt from: http://www.ilga.gov/legislation/ilcs/ilcs3.asp?Act...

I'm looking for feedback from the BP community on how they would approach this...and whether it is true that there is no limit to rent increases in Chicago cook county.

 Possible options I have considered include:

• leave things as they are since things are going smooth
• increase the rent and get sued if my research isn't correct 
• increase the rent and keep the tenant month-to-month, with the risk that tenant may decide to leave and I may get an undesirable new tenant  along with costs to clean/paint and update the unit between tenants
•  increase the rent and have the tenant sign a lease, otherwise move out.  I risk vacancy for a month or two, but this area should allow me to find new tenants fairly quickly if I stay in the 1100-1200/month range

Any feedback and insights you can provide with respect to rent increase limits or how to handle this scenario are very much appreciated.

Is this property still available for sale?

Hi Mike,

Below are the questions that came to mind as I read your post. I understand you already have a few properties under your belt, so please pardon me if I’m stating the obvious:

How long is your 0% interest rate offer valid for? What would your interest rate/payment be when the 0% offer expires? Is there a plan to payoff the credit card with some form of refinancing within the 0% interest rate period?

Is the 100/mo cash flow with or without the rent increase?

Allocating 50% for expenses looks to be the general rule of thumb on BP, however what kind of condition is this property in? If the property is due for renovations or major repairs soon, then you may need to budget higher expenses, which will likely eat up your profits. Do you have a large cash reserve in place already for your other properties which may help out with unexpected expenses at this property? If your other properties are cash flowing nicely, they may provide some buffer, but it’s also possible that this property eats up your existing profits.

Keeping in mind my limited experience, this deal seems risky to me unless you can lower your monthly payment obligations somehow. Would refinancing another property for the downpayment on this deal be an option? i.e. would the increase in the mortgage payment for an existing property be lower than the monthly payments on your credit card? This approach could provide a higher monthly cash flow.

Full disclosure, I’m new to the real estate game. I own a 2 bdrm condo in Chicago, which I had to buy with my own cash because I’m from Canada and US banks won’t finance me yet (and I wanted to avoid commercial lenders for now). I’m working on building my credit history in the US so I can refinance my property with a US bank for down payments on duplexes and triplexes….what I’m trying to say is that I’m still figuring out the financing end of things.

FYI I live in Toronto and work in Buffalo at M&T Bank. It would be great to meet up sometime to discuss deals & strategies in the Buffalo area, I’m looking to start buying in the Buffalo area later this year once my US credit history is established.