Tenant paying below market rent in unit that needs rehab-

[Kari Koszdin]

I bought a triplex four years ago and inherited one tenant.  At the time, she was paying 1050/month for her small 2 bedroom apartment.  The previous landlord had not taken care of the property, so I needed to put in a lot of time and money to fix the place up. I did not raise her rent right away, since I didn't want to deal with a possible vacancy at that time.  She has been a good tenant- always pays on time, takes care of the property and is easy to deal with.

Over the past few years, I have raised her rent to 1325, plus now she is paying for all utilities. However, market rent for her unit, if I just painted it and did a few repairs, (would probably cost about 5K) would be about 1650.  If I did a more extensive remodel, I could get that up to 1850- but it is going to cost 15K. If I did get her out, I am leaning towards doing the more costly renovation, since in my experience, really nice units are easy to rent and I get fantastic tenants.

So here's the question- Should I just slowly raise her rent over time, as I have been doing, and not have to put money into the unit, but I will never get close to market rent? Or should I not renew her lease at the end of the term and do the renovations to get the higher rents?  

The current rent roll on the property is 4425, and I own it free and clear.  Property taxes and insurance are 500 a month. I have put a lot of work into this property, so I don't have other deferred maintenance issues- the property doesn't cost  a lot to operate.

So what I am basically asking is how much is it worth to have a good tenant in place vs getting more rent, but having to put in more more money?

[Angie Swader]

I have 17 years property management experience.  When you have a good tenant, who pays on time, keep them.  Always keep a good one, because you could spend all that money in repairs and turnover fees and end up having to evict the next one.  Just give her regular rent increases and continue to provide her with good maintenance.  She will move one day.  Then do the upgrades.