Can I increase rent ~60% on a newly acquired property?

[Lenny B.]

I just acquired a fourplex in average condition with existing tenants on a month to month basis. The tenants live there for several years and only had one rent increase from $750 to $775 6 months ago. In order to get this property into a cash flow positive territory, I would need to increase rent to about $1100-$1200 level, which is a market rate in this area of Sacramento (which doesn't have rent control)

I was thinking of giving tenants a 60 day notice about a rent increase with the option to stay or vacate. Does it make sense? I don't mind if they vacate, in which case I'll do some upgrades. Rent demand is huge here and I don't expect the units to stay open on the market for more than a few weeks. Thoughts?

thanks in advance.

[Kyle J.]

@Lenny B.  Since your property is in Sacramento and not SF, there is no rent control to be concerned about.  You just have to give the tenants 60 days notice if the increase is great than 10%. 

It sounds like the existing rents are way under market, so I'd definitely look into increasing them.  Whether or not you increase all the way to market rate really depends on how much you want to keep the existing tenants and whether or not you're prepared to deal with them all vacating. 

One idea you might try is to speak with the current tenants, point out what the market rate is for their unit, and ask what type of rent increase they could afford.  That way, they feel like they have some say in the process and you might get close to the increase you're looking for without a vacancy or need to upgrade all the units right away. 

Anyway, you have lots of options.  Good luck with your new property.