Inherited tenants below market rent

[Anthony King]

I am under contract on a fourplex in North Canton, Ohio. Very nice area and the landlord has owned for 20 years and retiring. One tenant has been there since 1994, is 87 years old, and pays well below market rent. Rent should be $300 higher. The other 3 tenants have all been there at least 2 years and could be $75-$125 higher. I run the numbers at market rent and it would cash flow nicely, but unsure how to get to that point. Is it even worth it to start out barely breaking even? I'm assuming the 87 yr old tenant couldn't afford even a $100 increase if she's on a fixed income. Looking for advice.

[Andrew Zannotti]

Originally posted by @Anthony King:

I am under contract on a fourplex in North Canton, Ohio. Very nice area and the landlord has owned for 20 years and retiring. One tenant has been there since 1994, is 87 years old, and pays well below market rent. Rent should be $300 higher. The other 3 tenants have all been there at least 2 years and could be $75-$125 higher. I run the numbers at market rent and it would cash flow nicely, but unsure how to get to that point. Is it even worth it to start out barely breaking even? I'm assuming the 87 yr old tenant couldn't afford even a $100 increase if she's on a fixed income. Looking for advice.

I would recommend running your numbers right now at what current rent is and see how your cash flow goes from there in terms of whether the deal makes sense. Breaking even out the gate is not necessary a bad thing depending on how much money you have in the deal and if when you forecast down the road you can project that the deal will be alot better because sooner or later turnover is gonna happen and the opportunity to increase rents is gonna come. I know your thread is gonna fill up shortly with people telling you this is business but I believe karma comes in business also and I would very weary of buying with the plan of increasing rents on a 87 year of tentant on a fixed income regardless of whether they are on a month to month lease or not (not saying that is your plan).