Rental Investment w/long time tenant w/rent 200+ below market

[Steven Pool]

Hello everyone,

I'm looking into purchasing my second REI but first SFR. List price is for ~$60k its a 2 bed 1.5 bath near the local university and community college. The tenant has been there for several years and the current landlord has never raised the rent of 475/mnth + utilities. The market rent in the area for similar houses is no less than $700+utilities/mnth.

My question is how is should go about raising the rent to approach (maybe be just under) the market. 

The tenant is on MTM lease currently and the selling agent told my agent that the tenant was informed that it is very likely their rent will go up once the property sells.

Thank you in advance for the advise and help.

[Aaron K.]

Unless you want to subsidize her housing you would raise rent like you would for anyone else, if you do want to subsidize her housing you can have a conversation with her about what is affordable.  Just keep in mind that you may well have a new tenant when all is said and done.