All Forum Posts by: Ronald Starusnak

@Ronald Starusnak

NY has rent control.... how can you raise rent?

 What's the market rent for their $300/mo units?

@Ronald Starusnak can you let them pay you in caramels or hard candies? They probably have that if they don't have the cash.

Also, are you worried about damages from the cats?

@Ronald Starusnak. First off I’m sure you knew about this before entering into a contract to purchase, so it should be factored in. I’ve had situations which were somewhat similar. It seems that you’re assuming these tenants cannot pay more, do you really know that until you talk to them? Do you know if they qualify for section 8? I would either stair step them up or keep rents the same for a few months if they agree to move out. Charity is important but I generally keep giving separate from business. If you decide to continue to give these tenants a $400-500 break on their rent that’s your choice.

Don't assume these ladies have been living the high life while paying $300/mo. I have one such relative (near 80) who lives in a 4th fl walk-up.  Been there 55+ years and the LL wants her out so he can raise the rent to 500%. She's covered by rent control, but if she gets ill she'd likely have to go live with someone because despite working for over 50 years, her monthly take home is such that she couldn't afford much more and hasn't qualified for other subsidized senior housing.

Your ladies may be on fixed incomes. They may qualify for small pensions + miniscule SocSec benefits which have not kept up with true COL since they now pay for part of Medicare. They may have worked in jobs that didn't pay much or didn't require SocSec withholding and so may not be eligible for it. And with the

 cost of phone, food, insur and medicine, even tv is no longer free, they may be living on the financial edge.

So speak with them and let them know what the rent should be and how you plan to get there. 

You're in business to make $, but you can do good while doing well. And ask yourself how you'd want a new investor to treat these folks if they were your elderly relatives.  

So conservatively, you are taking a $18,000 hit to NOI by having those rents at $300 instead of $800. Even if the CAP rate in your area is 10%, that's still costing you $180,000 in property value. If that doesn't motivate you to start ratcheting up rents, nothing will!

Strange, because nowhere in your post did I see where you'd talked to the women and explained the situation to them, and asked if they would be able to pay the rent, or even how much the rent was going to be. In all the time they've been there, has any investment been made into their units, and are they identical to the higher market rent apartments? 

This old lady thinks you need to show them some respect, and deal with the women as you would others in business. If they can't afford the rent, tell them you'll be asking them to move, and then give them the notice required in your state, before you find yourself on the other end of a discrimination lawsuit. 

@Ronald Starusnak

It's two weeks before Christmas!!!

Sorry, had to throw in an extra jab. We had a very similar situation with a duplex we inherited a tenant in. Around this time of year too. When we acquired it we had the property manager have a discussion with him about the rents. He told her that he couldn't afford any more, we struck out looking for social programs to assist (they weren't taking new cases), so we gave him three months notice to move out (It helped that he caused me $500 in come back fees for an appraisal and yelled at my property manager). He ended up needing to stay "just a little longer" than that notice but claimed he could pay closer to market rent than he previously let on. A year later and he's paying about 85% of market. We'll probably step it up slower than we would normally on account of his situation, but we are in a good position with the cash flow and he's never leaving until we price it out of his range (so no turnover cost) and never calls for anything trying to fly under the radar so that's been working for us.

If you don't handle the situation today it will only be more pitiful and harder tomorrow. Depending on your strategy, you need to either take the bandaid approach or start to incrementally raise rents until they decide to move on to somewhere else. You might find out that they can make rent happen at levels higher than they are letting on.

How much are they below market rents and what's the cap rate in the area? You see where this is going...