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Updated over 9 years ago on . Most recent reply

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Frank Closer
  • Rental Property Investor
  • Greensboro, NC
5
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How to increase rent 300% in 90 days?

Frank Closer
  • Rental Property Investor
  • Greensboro, NC
Posted

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.

Most Popular Reply

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Nathan Gesner
  • Real Estate Broker
  • Cody, WY
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Nathan Gesner
  • Real Estate Broker
  • Cody, WY
ModeratorReplied

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.

  • Nathan Gesner
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