8 Units Under Contract (First Buy and Hold Rental)

[Lauryn Meadows]

Hello all! 

My husband and I are under contract to purchase a mix portfolio of 8 units for $250,000. The bank is only allowing us to do 80% LTC so they are financing $200,000 while we are doing owner financing on the down payment portion of $50,000. The appraisal hasn't been completed yet, but my educated guess is that it will appraise or >$310,000. There are two SFH, two duplexes on the same lot, and a SFH with a garage apartment. These are all significantly below fair market rent. Currently gross rent on all 8 units is $3500. Most of the units are in fair condition, but all could use some repairs and updating apart from one that needs quite a bit of work. Keeping the rentals in their current condition (compared to other rentals in similar condition) we can raise rent to a gross monthly rent of $4350. After we repair and update all the units I believe we can get a gross rent of $5550/ month (but that is going to take a year or two to gain capital to rehab each unit.)

All these tenants have been in these units for years, some as long as 30 years. I'm sure that some will not be able to pay the increased rent or will not qualify to rent under our company's guidelines. All tenants are currently on month to month leases. How would you approach raising rent on these exiting tenants? Would you do one at a time or send out notice to all at once. While we have some reserves starting out we don't want to vacate all of the units and not have any monthly income from them. Also, I'm fearful that once we raise rent tenants may further destroy the property.

This is our first buy and hold rental property, so any tips are greatly appreciated!