Raising rents on new acquisition

[Andrew Michael]

Hi all,

I am set to close on my first small apartment building next week (7 Units).  The current owner is about 50% under current market rent rates.  This confirmed by the appraisal report, local realtors, and my own DD and research.  The current tenants are all on month to month leases so that is the good news, if anyone moves out this is an obvious non issue.  The challenge is that some of the tenants have been there for several years and have never been late with payment.  This is a challenge because morally it seems wrong to walk in and double rents right away especially when a tenant has such a good history. 

I was wondering if anyone has had a similar situation and how they handled increasing rents on long term tenants.  I am thinking bringing them up to market rates over the course of a few years.  Is that too long, too short?  What are some strategies you have used to keep tenants happy in the midst of owner/ financial changes?  

This is particularly important to me for two reasons.  First I want to be fair and ethical.  Second, I have several other properties in the immediate area I am going to make offers on and thus do not want to build a negative local reputation.

Thanks in advance for ideas and feedback!