First Time Landlord Question

[Brian Buckley]

I am in the process of purchasing an investment property, where I will live in one unit, and rent out the other two units.  The upper unit is on a month to month, but the rent is $150 below the average rent in the area, and the lower unit is being rented to a neighbors nephew without a lease, and for well below fair market rent.  I am definitely going to do my due diligence on all parties involved, and if all checks out, continue month to month with the upper tenant, and start a month to month on the lower, with an increase to fair market rent.  My question is really regarding the upper tenant who has been living there for the past three years.  Would it be prudent to raise rent by the $150 that it's below value, or keep as is for a six month period as a trial?  I feel that I should raise the rent to the fair market value as soon as I take ownership, but others have indicated that maybe I should leave his rent be for the time being.  I turn to BP nation as the voice of reason, and the experience factor that I am looking for.  Thanks in advance!

[Jesse Waters]

@Brian Buckley Good question.  Having tenants that pay on time & don't cause problems is worth a lot more to me than just the rent collected.  I am guessing that you have a good rental market & could easily get new tenants if the ones you have moved out, just remember vacancies can be expensive.  So, I would give them some options, with 30-45 days notice.  Sign a year lease at a rate somewhere between what they are paying & full market rent, or go month to month at full market, either way get it on paper.  I highly recommend having each tenant sign a new lease with you, that way the contract obligations are expressly between you and the tenant, you want to avoid them doing the "well, our old landlord.... (did, said, allowed, let us, whatever).  

Hope that helps some.