Property Improvements and Tenants

[Jacob Gelinas]

Hi all,

I just recently bought my first three family rental property and I inherited my tenants with the house. So far (knock on wood) my tenants have been fantastic which, from what I’ve heard, is not always the case with inherited tenants. That being said, the rents are WELL below market and I’d really like to bump them up. One of the leases will be up in a few months and I’d really like to get that unit up to market value. I’ve been thinking about renovating the unit to justify the significant increase in price but I’m also a little afraid that that might push the tenant out. If I renovate the unit I know I can get it rented pretty easily because of the location but I’d honestly love to keep the tenant I have if possible. Does anyone have any advice? Also, when I have the renovations done, if the tenant decides they do not want to stay, can I have them done while they are still in the unit or do I have to wait until they are gone? Thank you for any help!

[Bart H.]

Originally posted by @Jacob Gelinas:

@Matthew Paul thank you for your reply! One thing I want to mention is that I am house hacking the property and currently the rents do not support the entire mortgage. That being said I’m paying far less of my mortgage than I would be in rent for an apartment in the area so I’m okay with that for now. But if I could get this one unit up to market rents I would cover the mortgage and could even cash flow every month. Do you still think it’s worth just raising the rent only slightly in order to keep the tenant?

 IF they are good tenants, I would slowly increase to get it closer to market.  If they move, that's when to renovate. You might be shocked and find out that you raised rents to market and ended up not needing to do any rehab.

Like others have mentioned, update what needs to be fixed on the outside, fix up your unit, and then rehab the other units as they become vacant.

We generally have a long term view and have a tendency to slightly over rehab.  But we would more or less ease into it between tenants in order to attract top tenants.

Can I also mention, in general we have had terrible luck with inherited tenants.  ALL of our issues with tenants seem to happen if we are 1) impatient with finding a tenant, 2) inheriting a tenant.