Home Insurance - Raise Rent?

[Robert P.]

I'm in the process of purchasing my first 3-unit property and after doing some calling around, I have come to find out that my home insurance is going to be anywhere from $500-$1,000 more a year that I was anticipating.

The property cash flows even with insurance $1,000 more a year, but my question is:

Should I raise rents (even by $25/month each unit) to make up for this increase in insurance right when I purchase the property? Or just eat the loss and maybe increase rents the following year. I don't want to come off on the wrong foot, but I also don't want to be eating $80-$100/month that I was expecting back to save/re-invest.

[Kyle Hipp]

Your expenses do not determine rental amounts. Market rents determine rental amounts. Whenever I raise the rent I always tell tenants about more expensive properties in the area and increased rental averages in the local market. I will also mention any improvements or upgrades done and and increased costs such as taxes, insurance, utilities ect.