Increasing rent for rental properties

[Kim Stuart]

Hi all

Question for those of you with experience on choosing rental properties to invest in. As I am looking through the list of properties my agent has provided me, I have noticed that there are a lot of properties on the MLS with "unit rent" prices provided. Assuming those are either properties with tenants currently living in there and their current rates (maybe the current property owner has had that property for awhile, and those rates reflect the rental value when they first purchased it) or it is possibly an average price based on the rental value in that area. In any case, would that be a deterrent in your decision and if not, what is the success rate or could you provide any success or failure stories or tips on how to raise the rental value of a property you acquired which involved taking over the leases of current tenants at lower than valued rental prices?

Regards,

Kim

[Dion McNeeley]

Hi @Kim Stuart,

Here is what I did. This was to an existing tenant of mine. However this would work with tenants in a place you purchase.

I made a binder with a map and locations of rentals close to the unit. Listed out what the current rents are for units similar in size and amenities. In my case the rents were about $600 more than what the tenant was paying. I made a page for each rental I was using as a comparison. Once I explained to the tenant the basic concept that you have in your question I asked what the tenant thought would be fair. This way the tenant saw that "fair" for me would be a rental raise of $600.

So the tenant then asked me to raise the rent $350 which was more than I was expecting to be able to raise the rent. We signed a new one year lease that went into effect 90 days later. (This is required here in Pierce County fyi.)

So now I am making better rent than I was expecting. The tenant feels like they are getting a deal since it could have been justified to raise the rent further.

Here is something to keep in mind about rent prices close to Tacoma. JBLM is a large base. Over 40K personnel. A few years ago the average BAH for an E5 went from 1400 and change to over 1800. This made most land lords adjust rents in line with this. That is why you will see so many tenants who are paying lower than current market rents. 

Good luck, hope this helped.