Raising rent on a long time tenant.

[Joshua Mellor]

I have a tenant that has lived in one of my apartments for 12 years with the rent never being raised. The apartment is way under what the rent should be. Is it out of line to raise it 8% come February 1st after the holidays? It is currently only 510 plus utilities i feel even at 550 it is still undervalued although it has not been updated since she moved in. My other comparable apartment is 600 plus utilities which is also probably a little under too.

[Jennifer T.]

Originally posted by @Joshua Mellor:

@Nathan G.

Although I just got sick to my stomach seeing those numbers I appreciate the truth. This is something that I needed to see. I have been looking at this investment wrong since I have owned it. I always looked at it just as something I would sell one day and as long as I didn’t lose money from month to month I was ok. Now I see I left a huge sum of money on the table and that is just with one of the apartments. Again thank you for opening my eyes.

Not trying to make you feel worse, but just as more food for thought.  A property with tenants in it that are paying below market rent, makes the property LESS valuable that it might otherwise be.  It's the double whammy of less rental income along with a lowered property value.  I've been that buyer.  All things equal, I'll pay more money for a property that's delivered to me vacant than one that's delivered to me with tenants paying way below market.  Because that second option=more risk, more hassle, and more time and expense.  All of which gets taken into consideration with my asking price, if the tenants and their sub-par rent are staying past closing.