Best way to raise below market rents on newly purchased property?

[Branden Drake]

Hello everyone. I am under contract on a duplex in a good area of Springfield, Ohio. Current rents are well below market @ $460 and $500 a side. The exterior of the property is in excellent shape but the interior does need some cosmetic work. The tenant paying $460 a month has been there for over 14 years and is month to month. The tenant paying $500 a month plans to move in June, shortly after we close on the property. Market rent in this area is $650-$700 a month for each unit. Obviously if the one tenant moves out after closing, renovating that side and increasing rents will be easy. What would everyones advice be on increasing rent for the tenant that has been there for 14 years. Increase it all at once or slowly over a few years? Keep in mind it will be difficult to do any renovations while the tenant is living there. Thanks in advance for the advice. 

[Thomas Guertin]

I am not talking from experience but I would probably give the tenants a 3 month notice of a rent increase and raise it to $575.  They won’t be able to move because you are still under the other rents in the area. Then after a year and renting the other side you can determine if you want to increase the rent again.  Sometimes long term tenants are better than making an extra $50/month.

I would make sure you get a letter from the other tenant that is planning to move their intention and the date their moving. You may want to give them the rent notice too Incase they decide to stay.