Buing a 4plex and trying to decide whether to raise rents....

[Nicholas Lehman]

I am new to the real estate game and am currently scheduled to close on my first 4plex in Anchorage Alaska on April 20th. I got approved for an FHA loan so I will be owner occupying one of the units. Currently the units are all fully rented but one of the tenants is supposedly moving out soon. Currently the rents on the 4 units are 995,995,915 and 700. The tenant who pays 700 has lived in her unit for 22 years and it has never been remodeled since it was built in 1976. All four of these units are 1br/1ba with dishwashers and W/D. The rental market in Anchorage is fairly strong but may be in some trouble due to falling oil prices. It has been suggested to me that when I take over the property I should raise the rent on the tenant paying 700 up to 995 or higher. Most likely she will want to move out at that point and I can occupy her unit and work on remodeling it until I move out in hopefully a year or so and then get closer to market rate for her unit and allowing the 4plex to cash flow better. Is raising the rent on the long term tenant the right move? Should I raise all of the other rents slightly by 5 percent or so to reflect increasing property taxes and to improve cash flow?

[Tyson Cox]

I have a few questions for you:
1) Is $995 already at market rent for the specific area your building is in?

2) Why is one unit at $915? Does it need work? Is the current tenant on still locked in with a lease?

3) Will the increase to $995 for the $700 unit actually get the tenant to move? If comparable rents are about the same, tenant may not move.

4) Do you really want the longterm tenant to move? They probably don't complain about much and are comfortable in their apartment.

I would consider raising the rent on the $915 unit first. If that tenant moves, I would offer it to the longterm tenant at market rent. They can choose to move there or move out. The more choices you can offer tenants, the easier things go.