Rental properties in LLC

[Luke Eastman]

Hello I had a question, my father passed away a few years ago and left us two rental properties in Virginia. Both properties owned free and clear by our mother but my brother has the power of attorney. We are trying to get everything in order and are thinking about forming an LLC for them. We live out of state. I was wondering, should the LLC be registered in our home state or in the state where the properties are? Also, should it be a separate LLC for each house? And on a different note, each property has had the same tenants for 10+ years now but we haven't raised rents in maybe 7 years and they are way too low, is there a legal process you have to go through to raise rents or can we just tell the tenants that rent is increasing by a few percent? In case you couldn't tell, we are new at this and any help is much appreciated. Thanks!

[Luke Eastman]

Quote from @Nathan Gesner:

Quote from @Luke Eastman:

Talk to an attorney about putting the properties in an LLC to see if that's the best option for you. The attorney should be capable of explaining the pros and cons of different options.

There's no rent control in Virginia, so you can raise as much as you want as long as it meets the terms of the lease. You can't increase rent on an existing lease. If their lease term expired, then they are automatically converted to a month-to-month lease and you can give them 30 days notice.

I recommend you study the market to determine an accurate rent rate. Talk to your tenants and see if they are interested in staying with a rent increase. Bump them up close to market rate, but consider keeping it 5-10% below market as an incentive for them staying. For example, if they are at $1,000 now and market rent is $1,600 then I would offer an increase to $1,500 as an incentive to stay. If they choose to leave, then I would give them no more than 60 days to vacate, clean the place up, and rent it for market rate. If they choose to stay, check their income to verify they can afford the new rent rate.

No rent control in VA is good to know we wont have to deal with any of that. I did look at the market rates over there and they are both paying about 300$ below market rate and so far we haven't increased it because the properties are located in a very small town so we don't want to lose the them as tenants. But I like your idea of just talking to them first and also checking their income. But either way we will definitely keep it below market rate so they have that incentive to stay. Thank you!