Raising Rent for inherited below market rental

[Jason Bach]

My wife and I recently purchased a 3 flat in Chicago. We have done some major remodeling to our unit (now a duplex to the basement) and also the top floor unit. When we bought we inherited a lease for the 2 bedroom, 1 bath with ample storage and an enclosed back porch. Many realtors have informed us, and I have confirmed, that $875 for a 2 bedroom in our area is far below market and almost laughable (we had no issue renting out the top unit at $850). My wife and I love the 2nd floor tenant as they are great and quite easy to get along. We are hoping to raise the rent to $975 for the current tenant when the lease expires in March (still below market and we should be able to get 1100). My question is what is the best way to go about this while still being respectful and not incurring any backlash? We are thinking of having the discussion soon to give ample time to set up a move if this were to happen. 

Probably thinking too much....

Jason

[Jay Hinrichs]

Originally posted by @Anthony Wick:

If the rent is that high in your area, then you definitely should be able to get a decent class of tenants. Let me ask you this; are you a rental property owner to make friends, or to make money? You can, and should, be raising rents to fair market value. That doesn't make you mean, or a jerk, or a slumlord. It makes you a business person. 

I did the same when I inherited tenants. I talked to them in person, and said; "You've been great tenants for the short period of time I've owned the property. We would love to keep you as tenants, but I'm sure you know your rent is well below market value. The new rent will be ($$$$$) if you'd like to renew your lease. Please let me know as soon as possible what you decide. I'll let you guys talk about it before you make a decision". In my case, the rent went up $100 a month, so not nearly as much as yours should. But, I wasn't about to give up that $1,200 in income for the year just because the tenants are nice people. 

 in Chicago that's less than section 8  pricing.. and about right for the south side or lowest value areas.