Buying 4 duplex should I move rent higher as soon as I close

[Carson Plant]

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.

[Steve K.]

@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.