Raising rents on inherited tenants

[Matthew Insley]

I just bought a 4 plex that is old but in pretty good condition for a C+ neighborhood.  I know that the rents are lower than what I could probably get, but I have decent tenants in place since before I purchased the property.  The first issue is that even though all 4 units are very comparable, they are not renting for equal amounts.  I am receiving $450 for 2 units, $410 and $400 for the other 2 units.  2 leases are expiring in April 1=$450 per month and has already expressed no desire to leave, 1=$400 per month with an unknown intent.  I have one tenant on a month to month agreement for $410 per month and has expressed concern of new ownership and that she is comfortable with where she is (she has lived here for 12 years).  I have assured her that everything will remain the same for now, and she will be given 30 days notice for any changes.  The final tenant is renting for $450 and his mother pays his rent every month and he seems like a loser, but other than smoking in the unit, he seems to be an okay tenant.

I obviously am not going to do anything until the spring so that I don't lose any tenants at a time that is very difficult to get new tenants.  I would like some advice to how and raise rents on the current tenants with somewhat of a low likelihood of losing them.  For this property, I would be happy with rents close to $500 per month.  Please help! This is my first rental and could use some expert advice.  It is also my first bigger pockets post. Thanks!

[Justin R.]

I have inherited many low paying tenants...But I may not be the best guy to give you the "business" answer.

Do to my personal beliefs and morals, I do not raise rent on quality tenants even if they are below market. Looking at numbers objectively like investors do, means a percentage. That "percentage" to someone else may be food on the table, especially when talking about tenants on in your mentioned socioeconomic class at 400 dollar doors. 

If you do raise rents, just do it slow and use communication with your residents. Even better, buy the property where it works NOW.

With that being said, I evict bad tenants. When the tenants leave I rehab the unit to obtain the highest market rents.

Best of luck.