Rental Property Investor · Helena, MT · Member since 2017 · 282 posts · 117 votes
Hey BP,
I have a 6 unit property that is currently below market rent by $100 - $150 and the previous owner paid for city water, sewer, and garbage. The property is in a smaller town where water is a flat fee (not metered for the property - shower once per year or water your lawn everyday - same cost). The city services are $75 per unit.
Comparable rents in the area are $550 - $600 per unit with included city services. Mine are $450 with included city services.
The 2 options I'm considering are:
1. Raise rents to $500 in 2 months, $550 after an additional 6 months
2. Keep rents at $450 and assign water bill to tenants
Most renters are long term tenants (1 yr, 6 yr, 6 yr, 9 yr) and have kept their units maintained well. I'd rather they pay their own utilities and deal with that themselves. Anyone have experiences on which is most likely for the tenants to accept and continue renting?
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
7y
@Andrew S. you should figure out what your existing residents can afford based how they currently pay. You should then figure out if you are ok having vacancy increase when a few people move out if you raise rents. From my experience, you should figure out what the total payment is in the market and try to follow that while maintaining the occupancy you want. Most of your residents won't care what (rent or RUBS) or why you are charging more, they just care that you increased how much they owe.
Investor · Atlanta, GA · Member since 2016 · 335 posts · 144 votes
7y
@Andrew S. Hello Andrew. Why can’t you do both? Cost of living goes up, so does rent cost. How does your units compare to your competitors? When is the last time you did a rent analysis? When is the last time you updated your units?
Property Manager · Orlando, FL · Member since 2016 · 479 posts · 277 votes
7y
@Andrew S. find out what your market is, sometimes tenants won't take a property if utilities is extra because no other property is doing it. Sometimes you can't attract higher quality tenants because they know the worse properties don't charge extra for it.
On your numbers $450-$550 is an extra $100 a month, RUBS is $75 extra...all things being equal I think the answer is pretty clear.
Comparable rents in the area are $550 - $600 per unit with included city services. Mine are $450 with included city services.
Unless you believe there's an opportunity to differentiate yourself from the rest of the market or protect from possible significant cost increases (doesn't sound likely with fixed costs) - stick with the norm for the market. Raise rents.
Rental Property Investor · Helena, MT · Member since 2017 · 282 posts · 117 votes
7y
@Christopher Hunter My units are pretty comparable, they're in decent shape but nothing fancy. I just closed on the property today and completed the comp rent analysis over the past month. They haven't been updated in 10 years? Based on the current resident's tenancy. When a tenant moves out I will do minor updates - paint, carpet, minor repairs.