PWND? Found out "low income" tenants make more than me.

[Account Closed]

I inherited tenants at a duplex I bought in February.  Both units had low income racial minority families with school-aged children. (Race is relevant because I'm white, and there's a well-publicized issue in Portland right now with gentrification and displacement due to rising housing costs.)  

I agonized about how to handle the situation, because they were paying half of market rent.  Ultimately, I decided to raise their rents by about half, from $695 to $1025, which was still only about 75% of market rent.  

Laws in Oregon require 90 days' notice to raise the rent that much, so they are currently still paying $695 until June 1, at which time it will rise to $1025.  

I'm losing money now, but after June 1 it should cashflow about $200/month/unit, BUT there is a ton of deferred maintenance that could cost $20k-$60k, depending on how much work I decide to complete.  

I found out that one of the tenants (family with one kid and another on the way) earns more than I do at my job (they probably make between around $45k between the two of them), and in the other unit, it's a couple with 3 kids and a dog, where the mom works full time (in a department store) and the dad goes to community college and gets stoned at home during the day (but I have no evidence of that other than personal observation when I repair stuff over there).

The point is, as each week passes and I lose money paying for the loan on this property, I feel PWND. I want to raise rent again, effective 10/1, to $1200, which is the HUD fair market value that Section 8 pays in this area. (That's still low, but whatever.)

On the other hand, at least one of the units needs a lot of work, so if the tenants leave, it would be vacant for a little while and I'd have to pay for the repairs.  In the long term, it would be better to turn the unit.  In the short term, it's going to cost me more $$$, and I'll be displacing two more families to wherever far away from their schools and jobs in Portland.  

So there's a financial reason to keep them there for now.  As a side note, I'm planning on purchasing another property soon, so cash is good for me to have.  I don't really want to spend it all renovating this property.  But I have a business line of credit at 8%.  ANYWAY . . . 

Have I been pwnd and if so, should I do anything about it?  Or just wait it out and raise the rent in a year?

Oh, and one of the families (the one that earns more than me) is having a baby in August.  If that makes a difference.  

[Marianne C.]

Hey @Account Closed!  I don't envy you in this quagmire ;)  One perspective would be to not worry about what they can or can't pay.  Only worry about what you can control -- you need to make money and still run a business with integrity.  So find the balance with what is right for you.  Doesn't sound like your thinking about evicting them, so they may choose to stay if you raise the rents.  Good luck!