Under market rents. How much do I go up?

[Brian Hamel]

Hi BP, I acquired a property last year in a small market and have came to notice the current units are under market. I should be able to get $750 to $850 per unit. Right now they are $475, $550, $550 and $575. This summer I am planning on making adjustments but am not sure how big of a jump I should make. I would be ok with having to do remodel to get the higher rents. Just want some input on what people would be looking to get. I am planning on holding for a very long time so turn over to get market does not scare me. What should I look for?

[Marc Winter]

We build in 5% annual increases into our leases.  But at that rate it will take you years to get to where you want to go. 

You could start with the lowest rent unit and don't renew the lease. 

Units are rented (and sold) on appearances of kitchens, baths and curb appeal.  Depending on size of unit, you could go all-out 'millennial' with stainless, granite, ceramic and upgraded fixtures, ie lights, faucets. 

You will have to decide how far to take the unit in upgrades in a small market, relative to rent you will be able to receive.