Buying Rental Properties With Below Market Tenants

[James Lucero]

Hi all, 
I'm looking at some single family properties in the area and there is one for sale that says the current tenants are paying $500 below market value. I've read a lot if posts about the difficulty of vacating a tenant, how would one go about raising the rent for said tenant? (House price reflects value with the extra $500 that are currently not being charged.) TIA

[Alecia Loveless]

@Theresa Harris if this is the case I would no longer invest in this state/area.

I bought a property 1 year ago with rents about $500 under market. I immediately sent out certified mail and raised the rent by $200-300 per unit. These tenants knew they were underpaying and only 1 moved initially. Over the course of the year I have turned over 4/8 units and been able to rehab and rent for more.

The only reason I didn’t rip off the bandaid and raise rents the full $500 is because I planned to switch it to where the tenants will be paying for their own heat. That process has taken longer than I originally thought but will be done soon.

I will recover this cost of new heating equipment in 2 years through the savings of what I paid this year for heating oil.

Sometimes there’s extenuating circumstances.