New Fourplex/ Low Rent

[Kim Herrick]

Hello All!

I am in the process of purchasing a 4 unit apartment complex. The rent is below the market average by $65 per unit except for one. 

All four units are MTM and have long term tenants. The current owner pays gas, water and trash. How quickly can I raise the rents? Do you do it in increments or do you do it all at once? As far as the utilities I supposed I have the same question. Can I have them spilt the utilities right away or should it be in increments as well? 

I don’t know the tenants but it’s nice to have long term tenants there. Have you had good experiences with long term tenants or is it better to start fresh.  I’d love to hear your experiences and receive any and all feedback. 

[Logan Allec]

@Kim Herrick

This answer all depends on your property.  If you can have qualified people lining up at the door to rent the place at market, then yeah, this is a business, not a charity.  Do what you have to do.  Raise the rents (to the extent you can do so legally), and if your tenant doesn't bite, find a new one.

But if this is an area that's hard to fill with qualified tenatns, you might be better off working with the long-term tenant to gradually raise the rent over time.

And of course this goes over a lot easier if you add value first.

I went the latter route with a property recently.  I bought a 4-plex in September 2015 in a rural location.  There was a long-term tenant in a unit paying $995/month. I added value, fixed a couple of her pain points (rodents, leaky roof), and then got her to sign a 2-year lease, the first 12 months at $1,040 and the last 12 months at $1,200. She agreed.

But of course your mileage may vary.