Undervalued Renter for new investment

[Walter Melnyk]

We just purchased a duplex where the owner lived in one, a tenant in the other. We will rent out the owner unit at $1250, but the tenant is paying under market rent at $900 on a month to month lease. We ironically happen to know the tenant, but not a close friend and she seems to take very good care of the unit. Is it best to slowly inch up the rent and eventually get to FMV or to give 60 days. notice of a rent increase to $1250 where she will most likely not be able to pay it (she's on Social Security)?

[Charles Carillo]

@Walter Melnyk

In the age of COVID I am much more conservative with rent increases. For example, we are currently not underwriting for any rent increases in the first 2 years on all new purchases. You also are gambling that a person will not send you a CDC letter. The CDC deadline will most likley be extended past Dec. 31. I would start doing some small repairs around the property and raise the rent little by little. If they are a good tenant and they are paying; you do not want to lose them. Others might say to raise the rent and have her move out but every new tenant is a risk; you do not know how they will act and if they are going to pay rent on time or if they are going to send you a CDC letter or if they are going to be good neighbors. Applications and background/credit checks only go so far.