Rental Property Investor · Member since 2018 · 44 posts · 6 votes
Buying 4 duplexes and everyone paying $600 a month and wanting to raise the rent to $650 month. It only $50 more a month but Is it better to do this as soon as they are signing new lease with my company or wait for a year.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
7y
@Carson Plant I’d be cautious about turnover. In my experience turnover/vacancy is the #1 profit killer, and finding new tenants is the #1 time suck. I didn’t care about chasing away long term renters as I took over new properties early in my career but looking at the numbers has since taught me to try to keep them and raise rent more gradually. Are the units all nearby each other? If so, and you have several vacancies at the same time, they will be harder to fill and that could get very expensive. I find it helps to speak with the tenants and gauge how well they will be able to absorb an increase. You’re talking about an 8% jump 600-650. Will you make improvements on the property to help justify that? Is the local market increasing 8%/year? Can they go down the block and find something similar for $550? These are things that help understand the psychological impact for tenants. I’ve lost tenants over $25 and that was a mistake on my part, as the next tenant paid a little more but left at the first lease renewal and the two turnovers cost me more than if I had just kept the original tenant at the lower rate. I would work with each tenant on an individual basis and try to keep them in place. I actually often just ask tenants what they think is fair and some of the time they actually throw out a higher number than I would have said anyway lol. Try that and see if any say $700. If they say they don’t want any increase (also common), explain that market rate is $650 (provide comps), offer to fix whatever issues they have, and if it’s still a deal breaker for them at $650 compromise at $625. I would just recommend going easy on drastic increases on all units simultaneously to avoid multiple vacancies, unless you’re prepared to lose money for a few years and spend a lot of time and money screening/ placing new tenants.
Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes
7y
What do their current leases say? You inherit the leases and once they're up for renewal *then* you can sign a new lease and raise rents. You can't break their current lease terms simply because you're a new owner.
I would give notice to immediately raise rent to full market. $50 or higher if that is the case. I personally do not like to avoid or postpone the inevitable. Spreading it out only prolongs the resentment and for that reason I prefer that inherited tenants just leave.t. Rip off the bandied and get your business immediately on track. If it's only $50 most will stay or move out over time allowing you to get replacements.
Put them all on M2M leases when you renew to allow you more control over the business. You may find you want to be rid of them all.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
@Carson Plant Mostly agree with Thomas (we don't agree on length of leases, but we aren't in the same area either). I'm assuming you're buying these properties because you like the area, the potential, etc. Why would you wait to raise rents? If the tenant cannot handle $50 raise in rents you probably don't want them as your tenants anyway. As soon as their current lease allows, put them under your own lease with the new market rent.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
7y
@Carson Plant I’d be cautious about turnover. In my experience turnover/vacancy is the #1 profit killer, and finding new tenants is the #1 time suck. I didn’t care about chasing away long term renters as I took over new properties early in my career but looking at the numbers has since taught me to try to keep them and raise rent more gradually. Are the units all nearby each other? If so, and you have several vacancies at the same time, they will be harder to fill and that could get very expensive. I find it helps to speak with the tenants and gauge how well they will be able to absorb an increase. You’re talking about an 8% jump 600-650. Will you make improvements on the property to help justify that? Is the local market increasing 8%/year? Can they go down the block and find something similar for $550? These are things that help understand the psychological impact for tenants. I’ve lost tenants over $25 and that was a mistake on my part, as the next tenant paid a little more but left at the first lease renewal and the two turnovers cost me more than if I had just kept the original tenant at the lower rate. I would work with each tenant on an individual basis and try to keep them in place. I actually often just ask tenants what they think is fair and some of the time they actually throw out a higher number than I would have said anyway lol. Try that and see if any say $700. If they say they don’t want any increase (also common), explain that market rate is $650 (provide comps), offer to fix whatever issues they have, and if it’s still a deal breaker for them at $650 compromise at $625. I would just recommend going easy on drastic increases on all units simultaneously to avoid multiple vacancies, unless you’re prepared to lose money for a few years and spend a lot of time and money screening/ placing new tenants.
@Carson Plant What's more important is finding out what the market rent is for similar properties in your area. If the current rent is slightly lower than market rent, I wouldn't raise the rent. Vacancy and turnover kill cash flow. Plus, if you loose a paying tenant for $50/mo what's the guarantee that you will find another paying tenant for a higher rent
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
7y
@Carson Plant In all states existing leases survive the sale unless stated otherwise in the lease. You will have to wait for the current leases to expire to raise the rent legally unless you can convince the tenants to sign new leases with you.
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
Stepping over dollars to chase dimes.
Unless it is severely under market I would ride it out. You won’t notice the 50/month increase. You will feel the effects of a vacant unit, turn over, etc...
Loveland, CO · Member since 2014 · 30 posts · 5 votes
7y
@Carson Plant I am also buying a 4 plex and all 4 tenants are month to month. I have worked it out that I will be offering the current tenants that they can stay M2M but at a higher rate closer to market. But if they sign a new lease I will leave them at the current rates. (About $40 under market). I figure it's a win for me because long term money vs short term unknowns.