Rent increase for inherited tenants at low rents

[Yulia J.]

We've just got a triplex. My family and I are living in 1 unit, and we inherited month-to-month tenants in the other 2 units. They've been renting here for 7 years or so, no trouble. Their rent is very low  - they are paying $760 and $780 while market rents for units like those are at $1,000 in their current condition, and they go for $1,200 if updated. We want to keep the renters as they are already here and paying, we would just offer a 9-12 month lease.  I am thinking to meet in the middle for now -  that would be a $110 instant increase -  and tell them that there will be another increase in 9-12 months. 

How would you go about it?

[Susan M.]

There's a lot to be said for long-term, good tenants.  Sure, you might be able to get $1K for units in that condition, but with the unknown of new tenants that could cause all sorts of problems, turnover costs, etc.  

If it were me, I would let them continue on their M2M plan and increase their rent to $800 and $820 for now and just play it by ear for future increases.  With M2M, you are free to raise the rent any time with notice so no need to plan for it.  If they remained good tenants and didn't cause any problems I would wait a year or so and raise closer to $900 then maybe up it another $50 or so in the next year or two.

Turnover is a profit killer.  I go with the long term good tenant every time.