Raising rents in a 4 plex

[John Kilhafner]

Looking to raise rents in a 4 plex to near area average, the property was purchased a couple months ago and each unit is well below market.  My thoughts were to send a letter letting the tenants know that the rents will be raised at the 1st of the year to give them time to decide to stay or find another apartment.  Trying to figure out if a 25% increase is to much, which is only $100 but I understand this is a lot of money to some.  Similar units in this area range from $525 to $600 a month, I figured I would make the initial jump to $500 then slowly raise to market price.  Any advice or things I might be missing here would be appreciated.  

[Joel B.]

Hi @John Kilhafner. Although a 25% increase is a lot for many people, giving people six months notice to make a change is the key that makes this work. Scott M above has great points, so consider those perspectives as well. Also look at what their current leases state. If a tenant's lease isn't up until later next year, there's nothing you can do there.

In my opinion, raising rents from $400 to $500 is not a lot because you can easily make $100 bucks (Doordash/Grubhub, etc.), so I (personally) wouldn't focus too much on the fact that it's 25%.

Also keep in mind that if you give people options, they feel less like a victim. They may not like the options they're presented with, but they at least get to choose. Wrap that up with 6 months notice to find another place is gracious of you.

So here's what I would do. Send the letter giving them...

• 6 months notice of rents going up
• Option 1: Price of rent if you stay at month-to-month (maybe $600/mo)
• Option 2: Price of rent if you change to 3-month or 6-month lease (maybe $550/mo)
• Option 3: Price of rent if you change to 1-year lease (maybe $500/mo)
• Add that you will be doing improvements over the next year and tell them what you will be doing

All that together gives them options, including finding another place to move to. They can also see what staying with you will look like and what the benefits will be.

Those are my thoughts. Keep us posted on how things go.