Apartment purchase rent increase

[Christie O'Malley]

Hi all, 

We are purchasing our first "apartment complex". It consists of 3 duplexes, 1 triplex and 2 commercial units. Before closing, I would like to have a general idea of how to appropriately go about increasing rent. In the past, this was an easy task with only one or two tenants involved but with 11 we do not want to ruffle too many feathers so quickly. We have plans to go in and do small upgrades to each unit before writing the letter to the tenants. Each unit is significantly undervalue for the going rate in the area and many of the tenants have had leases in place since 2010-2012 and never have had a rent increase. This will be a shock to all and we want to handle this the best way possible, as many believe this is their home and would like to stay for years to come, understandably. 

Does anyone have a book they have read that has helped in best practices for commercial purchases and rent increases? I need to comprise a letter to the tenants and would love to hear how other investors have handled such situations in the past. 

Thank you,

Christie

[Karl B.]

Over the years I've read some great ideas on rental increases on these forums. One idea I really liked is to ask each tenant what upgrade(s) they would like and once hearing their requests then ask them what they think a fair rent increase would be to reflect these wanted upgrades. 

This way they're getting what they want; if their rental increase number comes in low you can tell them what you think is a realistic number. This way you're giving them the improvements they want and you're giving them what feels to them as options/a say instead of simply telling them their rent is going to be higher.

Sure - you may want to upgrade things they haven't mentioned - just bake some of that into the rent hike.