Raising Rents Monthly?

[Heather Dickison]

Hello,

I recently acquired a 6 unit property with existing tenants and under market rents. One tenant already asked if he can break his lease and move early (woohoo!). Most of the others are on month to month leases. We were thinking of raising rents $10 monthly instead of just saying you now have to pay an extra $200 or $300 each month.

We would keep their leases month to month in case that gets burdensome for them and then if they choose to leave, we can flip the unit and go straight to market rents.

For example we would put on the lease:

March: $710, April: $720, May: $730, etc. and make our way up that way.

I wanted to get opinions and see if anyone has done that before or get other thoughts on that idea. We are aware that short term it would take more time for us to manage this and make sure tenants are paying the correct amount each month.

[Scott M.]

This will create more problems than you are trying to solve not only for your tenants but for you.  If you don't have the capital to do the rehab needed on all 6 units right now then raise the rents on as many units as you have capital to cover a vacancy/turn.  If they stay, move on.  If they leave, turn them and then move on.

Also, good to keep the current tenants on M2M until you know what is going on with them longer term.