Raising rent on inherited tenants

[Tony R. Yagiela]

Hello fellow investors!

My question is about how you would communication a rent increase to a tenant I inherited when I purchased a property.

The Duplex is located in an ‘A’ neighborhood and both sides were occupied by long term tenants when we closed.  One side went vacant and was paying $800 per month and I was able to rent it at $1075 (which is about $100 less per month than comparable properties, but the unit went vacant right before the holidays so I had to get competitive.)

The other side of the duplex has a family of 3 and has the same square footage, but one less bedroom.  They currently pay $850 per month.Other than the fact that they are pack-rats, they are the best tenants a landlord could ask for.  The occupied unit needs some work, but fixed up, I could re-list it at $1100.  I think a fair rate for the unit in its current condition is around $975.

Their lease is up January 1st so I want to give them notice.  Would you write a letter outlining the reasons for the rent hike, call them, or tell them in person?  And also, do you feel a $100 per month increase is excessive in this situation?

Any input would be appreciated!

Regards,

Tony

[Madeline Burke]

Tony, 

Personally I like to raise rent on all my tenants just a little bit every time we resign (annually) that way they won't be surprised or offended by bigger hikes later on. I would meet them in person at the resigning and raise the rent $50 a year until you are up to market. Keeping them in the unit saves you vacancy, marketing, cleaning, and repairs. I would shake hands, fix any complaints they have, and ease them in to the new schedule right away to get off on a good foot.
Best of luck!