New Commercial Rental Property Rent Increase?

[Chris G.]

I just took over management for a commercial building that's split into 4 units. One of them is a franchise name and is the largest unit. Two of the units currently have a cheap salon and the other is a cheap mom & pop beauty store which are only open a few days a week so I can't image they make a lot. The last unit is vacant. The owner who I took this over from has no leases with the current tenants so they always pay late and their only paying around $.85 per sqft in rent when we value it at around $1.25 per sqft. I know telling the tenants we're taking over and increasing the rent an extra $300-400 a month won't be easy as they barely pay their rent now on time. Does anyone have experience with commercial properties and if it's worth kicking them out and waiting to find new commercial tenants or better to keep them there and slowly increase rent over time. The building in total should be getting around $5500 in rent per month and currently is only getting $3000. 

[Nathan Gesner]

Quote from @Chris G.:

I just took over management for a commercial building that's split into 4 units. One of them is a franchise name and is the largest unit. Two of the units currently have a cheap salon and the other is a cheap mom & pop beauty store which are only open a few days a week so I can't image they make a lot. The last unit is vacant. The owner who I took this over from has no leases with the current tenants so they always pay late and their only paying around $.85 per sqft in rent when we value it at around $1.25 per sqft. I know telling the tenants we're taking over and increasing the rent an extra $300-400 a month won't be easy as they barely pay their rent now on time. Does anyone have experience with commercial properties and if it's worth kicking them out and waiting to find new commercial tenants or better to keep them there and slowly increase rent over time. The building in total should be getting around $5500 in rent per month and currently is only getting $3000. 

You bought a business, so run it like a business.

The tenant pays rent late and they are way below market. If you want a strong business, you need to get rid of them and find a new renter that pays on time and pays you what the space is worth. A loss of $2,000 a month is $24,000 a year. Own your business.