How do you reconcile your rent increase resulting in move outs.

[Tony Gallina]

Im looking at a property where the rents have been highly undervalued. 

There are tenants that have been in the apartment complex for the past 20 years and are paying $600ish a month.

The market rent for the area is ~$950.

Raising rents significantly may result in these older tenants not being able to afford the increase. 

Can you and how do you reconcile that increase?

[Kim Younkin]

Hi, @Tony Gallina, we can relate. We manage properties in an area of town that's both old and new-hip, and some landlords have never increased rent for their tenants even as the market has supported it. So we've seen investors come in and buy multifamily properties using market rents to crunch their numbers, and are sometimes faced with this issue when there are older, fixed-income tenants in place. 

It depends on who you are as a person and a property manager, but our take is that we wouldn't do a one-time significant rent increase for those tenants. It would have to be gradual. In terms of a general rent increase, we've found that most tenants won't bat an eye at a yearly $25/mo rent increase, but at $50 they do. We'd communicate with the tenants that a greater-than-normal yearly increase is coming, and tell them why.

At some point though there's the consideration of what the tenant's getting in return for an increase of a few hundred dollars a month over a few years. In the area I'm talking about, a lot of the units are very old, and we'd have a hard time justifying such a rate increase without updating the unit for them, or providing other amenities. Good luck!