Advice On Raising Rent for Long Term Tenant Paying Below Market

[Cameron Montgomery]

Hey Everyone,

I've had an off-market duplex deal sent to me by my realtor that looks like a really good opportunity. It's in a great neighborhood, is fully rented and the purchase price is reasonable. The only misgiving I have about the property is one of the units is being rented at way below market rate to a long term tenant. They have been there for 10+ years and are on a month-to-month lease. The individual helps shovel snow during the winter and maintains the landscaping around the house, so the previous landlord subsidized their rent for taking care of these things. 

That being said, the tenant is currently paying $400/month while rental comps in the area show average rent at $740/month for a similar unit. In order for me to make back an adequate return on my initial cash investment I need to increase the rent to at least $500/month and am looking for some advice on how to approach this situation. As far as I see it, this is this person's home and the last thing I want is to end up pushing them out of their long-time residence due to a rent increase.

Do any other investors who have dealt with similar situations in the past have any recommendations/strategies for how I can increase the rent while also being considerate of the tenants situation? I'm looking for both do's and don'ts in this scenario.