How do I raise the rents in a newly acquired property??

[Corey Reyment]

Hello BP!

We are closing on a new rental property on December 30th. It is an upper/lower duplex. 

The upper is 2bed/1bath and rents for $650. 

The lower is a 2bed/1bath and rents for $500. The lower has lived there for almost a decade and is on an oral month to month lease. They seem to keep the place in good shape and I'm sure they enjoy living there at $500 a month. The unit could easily rent for $700 a month if we had new tenants. So, here is my question... 

How do we go about raising their rent? Do we sit down with them and come up with a plan to raise it gradually over time with an end target of $700? So that we don't shock them with a $200/month increase? Or do we just go in and raise it and take the "risk" of them leaving. 

Thanks in advance!!!

[James K.]

If it is already cash flowing, I would slowly raise the rent. (assuming they are good tenants.) Let them know that you realize they are good tenants who have been there a long time and that you want to keep them there, but they are currently way below market value and that you have to raise it up.