How to increase rent 300% in 90 days?

Question

I know the subject title is bananas but hear me out. I'm looking to purchase a single family rental from my great aunt, it's located in a piping hot Downtown Charlotte NC neighborhood. Do to her age and desiring to be hands off, she has kept the same family in the property for nearly a decade at 1/4th the market rate. Well I'm not a sweet old lady, I have lots of rehab experience to bring the property up to sexy. This will be my first rental property, what are the tenants rights, as far as the property changing ownership and the new landlord wanting to attract higher end tenants. How does the process work? I'm new to REI, but I imagine I can't leave from the closing office, go to the property, and hand the current tenant a letter that their rent will be increasing 300% in oh let me see, 90 days.

Nathan Gesner · Answer

My guess is they don't even have a written lease or it is a decade old. Check your local laws to see what the requirements are for notice and then provide them with the appropriate notice.

Now, you want to run the property like a business, but that doesn't mean you can't have a heart. These people have lived there a long time and will probably have a difficult time finding a suitable replacement they can afford. So if you are required to give them 30 days, you may want to play nice and give them 90.

I would not immediately assume you will have to kick them out. If these are good tenants, maybe they are willing to pay a higher rate and stay in the home. Let's say they were paying $250 a month and the rental is worth $1,000 a month. Perhaps they are willing to pay $750 and stay in the home. The cost of renovating could easily cost you a year's worth of rent, plus you could have 1-3 months of lost rent while renovating and looking for a new tenant at the higher rate. That process could take you 3 - 5 years to break even!

If the tenants are good, my preference is to hit them with a big increase but still keep it below market and give them time to adjust. I have done this many times and increased their rent every three months over a one-year period. This enables me to keep good tenants with a proven track record, avoid a vacancy, etc. You have to look at the whole picture and count the costs/benefits from different angles.

Franklin Romine · Answer

Give the tenant a 60 day notice to vacate.  When the clock is up give them a new lease at the new rate.

Frank

Al Williamson · Answer

@Frank Closer

Yep, take yourself to coffee. Read the local rental codes for yourself. Take your time and list all the questions you have.

Then find a local real estate group or a mentor to answer your questions.

Do your homework and learn this part of the business.

Save yourself the heartache of mis-steps.

Jennifer T. · Answer

As others have pointed out, this can vary by state/county laws and the status of their lease, ie are they month-to-month, and/or if the place is rent controlled.

I recently closed on a duplex where the previous owner's brother had been living in one of the units totally rent free for 10 years.  There was certainly no lease and rent control doesn't exist in NOLA, even if he had been paying rent.  I was only required to give him a 30-day notice to vacate.  Which, yeah I did, within a couple days of closing.

I did offer him $450 "cash for keys" if he left within 30 days and left the place in good condition.  Or at least in a no more deplorable condition than it was already in, lol.  I did that to smooth out the process.  Initially, even with the cash for keys offer, he made a big stink about it and said he needed 90 days.  He actually had the nerve to tell me he didn't even know the house had been for sale.  I had already met this guy TWICE...once for the showing and the second time for the inspection.  Apparently he regularly lets random people walk through his home with no idea why they are there (sarcasm)?

At any rate, I firmly but nicely explained to him that it would greatly behoove him to take me up on my offer.  He would make extra money for just doing what he was required to anyway and, if I was forced to evict him, it would only buy him 2-3 more weeks anyway and he would lose that move-out money.  Thank you Louisiana for being fairly landlord-friendly.  He was out in 31 days with no vandalism and no further damage.  I let him slide on the extra day and still paid him the cash for keys.

Andrew MacLeod · Answer

As others have mentioned, state and local laws, in combination with the terms of the existing lease, will determine the necessary notice period and whether there is a limit on your rent increase.

There are lots of layman-friendly resources available online to determine what rights and responsibilities you have as a landlord or tenant. Here's a starting point for your research.

Nicole A. · Answer

You just need to know your basic rental laws for that area. Are they on a month-to-month lease? If so, you just need to give that 30/60/90 day notice to vacate. I think I've heard that in some places, the longer a tenant has lived there, the longer time you must give them to vacate. Again, know your laws.

Of course, if they are in the middle of a lease term, you'll have to wait until that term is up for them to move.

You could offer them the 300% increase first, but knowing they'll probably decline, be ready for giving them a notice to vacate (or whatever it's called in your area).

If the area has rent control, as suggested, then you'd have to ask them to leave for sure because you won't be able to raise the rent otherwise.

How to increase rent 300% in 90 days?

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