Strategy for raising rents

[John Warren]

Hi everyone,

I am finally going to be closing my first deal on a fourplex. The property is great, and it cash flows from day one, but the real reason I am excited about it is that all four units are rented significantly below market value. The only issue is that I am not sure how best to go about raising the rents on the current tenants. All four units are identical, and according to my research should rent for between $725-750 per month. Here are the current rents.

Unit A: $550 per month

Unit B: $650 per month

Unit C $650 per month

Unit D $675 per month.

To make matters more interesting, Unit A is occupied by a coworker that I know fairly well! How do I tackle raising his rents? He used to do small maintenance projects for the previous owner who was an elderly lady, and has he has lived in the property for 15 years. I am interested to see what the community thinks!

[Joe Bertolino]

1. Accept your coworker is going to be very angry with you.

2. Increase rent to $700 as quickly as you can per the lease in force. A year later raise it to the market rate. If someone leaves, freshen up the unit and get a new tenant at the going rate.

People hate rent increases but moving is a huge hassle and it is fairly expensive to come up with a new deposit and transfer all of their services.