Raise the rent or remodel?

[Michael H.]

I purchased 5 duplexes in August. All but 3 units were on month to month leases. I’ve raised rents on 3 so far because they were ridiculously low. I have 3 others that I need to raise as well. Two of them need work and are in the same building. Each of them probably need $3k - $4k worth of work. They are at $775 and $750. The area rent for the same unit is $950 for a clean and updated unit. The question is... do I raise them to $825 or $850 to build up reserves and and not lose a months rent from each side or bite the bullet for something I won’t see the returns on for a year and a half or two? Thank you for your insights

[Cara Lonsdale]

I would raise the rents, and continue raising them (quarterly, semi-annually?) to close the gap between where you are and where you want to be.  You don't know where the threshold is, but the Tenant will tell you when they decide to move out at whatever level the raised rents go to that is beyond them.  Take that opportunity to renovate.

My reasoning behind it is that you will want to take advantage of the turnover between tenants to remodel.  Why kick out a perfectly good tenant to remodel when you don't know how high they are willing to go to bridge the gap between the low rents and the market rents?  You could get closer than you think without having to put 1 cent into the property.

Just my thoughts.