All Forum Posts by: Daniel D.

If you're hesitant to do this someone else will. As an investor you want to make the most you can while being reasonable, it's tough but has to be done. 

Quote from @Daniel D.:

I'm sorry, but listen to yourself. Dear Tenant, I'm doubling-to-quintupling your rent, but you'll now have a grill to cook whatever food the food bank has for you this week. If the tenants valued a grill, courtyard, and shiny exterior that much, they'd have moved to a building with that years ago. They value cheap rent.

It's clear that you're having a difficult emotional time regarding this. That's fine and normal, but this is a business. There is no amount of renovation that will make this increase palatable to the tenants. Raising rents 10% or 15% and making improvements is one thing. Doubling rent and making improvements is another. 

And as for feeling bad about the older tenants, do you think they ever once had a conservation about if the landlord was doing OK financially and if they should be paying him more? They don't give a s**t about the landlord, you or the prior one, and wouldn't give you a dime to help you financially if you were in need. And that might sound super cold, but it's the truth and you know it. 

@Daniel D.

Wow $450 and $750 are really low rents. You've been a nice landlord. 

That is something I've struggled with also. My tenants are getting a very reasonable rent for out-of-state (Midwest) SFH rental. My property manager advised me that if I raise the rent too much it will scare them away - they've had the same rent for 2 years in a row but I'm planning to raise it the summer of 2023 when their lease is up, not sure if it will be 5%, 7% or 10%. My property taxes increased significantly and didn't pass it onto my tenants. My current rent is in the range of other rental comps but rent is going up across the country.

I agree with the other comments. Talk to them so they get advance notice. And raise your rent each year a little. Good luck and keep us posted!

Quote from @Daniel D.:

Rent needs to be raised because it is under market. Market rent doesn't care about what numbers you need to hit to be profitable. 

The tenants know they are vastly underpaying. They're not stupid. They knew this day would come. They either can or can't afford the market rent. Bribing them with a renovation isn't going to make them feel better or suddenly allow them to afford it.  

The reality is that you're probably going to lose all 6 tenants. Tell them all the new rent and when they all reply they can't afford it, give them the end date of their lease. Be fair, give them 90+ days and make it extremely clear that they need to start looking today, not day 89, as there will be no extension. 

Talk to them and give them notice. this is why it is important to increase rents regularly.  The tenants and landlords get used to doing it.

Rents are below market value, but you also say you want to do major renos (new kitchens, bathrooms and flooring).  Why do you need to do the major renos?  Is it because there are problems (eg tub is failing) or it is because they are outdated?   

Are the increased costs because of the renos? 

This is a problem I encounter all the time when myself or my investors are looking at a small multifamily; the current investor refuses or is lax in raising rents to avoid being the bad guy! In actuality, this helps no one. 

The current tenants have heart failure when “you have to” raise rents, refinance, sell etc… and need those rents up to market, but because you have been the nice guy, it gets you nowhere. OR the problem is passed on to the next guy!
This scenario has been ever so difficult these past twelve months while rents have almost doubled in most places. Do yourself and make some sort of rent increase each year to help keep you at least somewhat close to market rents