Building up the climate of a whole street

[Joseph Dykes]

I’m new hear. I am soon to be buying a set of 8 duplexes for $185k. Rents are currently at around $200-$225 per and this is the only bad spot in this side of town. Currently 13 of the 16 units are rented out.  I am a contractor and do most of the work myself or with one of my subs, so I know the costs associated and can handle completely renovating this area in order to raise the rents to $550 which is on par for even the cheapest other rent in the area with a huge demand and limited supply.  My question is where do I start? Should I begin buy raising the rents as I can before I start renovating and see if I can run out some of the lowest of the low or should I start fixing them up and trying to rent the renovated units out with some of the rif raf in place? 

[Bryan Hartlen]

It’s going to be hard to reposition your units and get top rents while old tenants and (I’m assuming) poorly maintained properties are nearby on the street.  

So, if you can handle to the worst case scenario (no tenants = no cash flow) while rehabbing, then I would raise rents on existing tenants as soon, and as much, as possible. This will clear out most of the undesirable tenants and will let you rent the first repositioned units as being the ‘first’ to come in a new up and coming neighborhood.  

The other option is to work your way down the street, one duplex at a time and plan on first couple units rents to be less than rents you’ll be able to get for the last couple. Once all units are complete you can increase first units to market rents during the next leasing cycle.