Rental property with tenants in place - how to go about adjusting the rents?

[Kay Nemen]

Hi all! I'm about to close on my first rental property (yay!) - a quadplex in the DFW area with all units rented below the market rent (about 20% below). How would you go about raising the rent - Would you wait for a few months or do it as soon as possible? All tenants are MTM with a good track history. The property should generate about $200/month in cash flow at the current rent. Obviously, it's going to put me in a safer spot if I raise the rent to market value, but this is also my first time dealing with a rental property out of state, so I don't want to come off too hard. There is a property manager in place, and I would like to keep using him. 

What do you guys think? 

Thanks in advance!! 

[Michael Smythe]

@Kay Nemen

We’ve found the best way to raise rent is:

• Determine market rent
• Share the proof with the tenant
• Tell the tenant, given your rent is $x and market rent is $y, what do you think if a fair increase?
• Often, they may volunteer a higher amount than you were hoping for.
• Those that respond “$0” or something ridiculous, you can request income documentation from them to justify.
• Don’t be afraid to share with them how much your property taxes & Insurance increased and that YOU cannot afford to absorb them.

ALWAYS get an increase or something of value annually or tenants will start thinking they should never have an increase, making future increases that much more difficult to negotiate.