Best Way To Raise Rents
As I mentioned in a previous post, I am preparing to buy my first investment property. The property has several tenents that are paying below market rent and whose rent will have to increase by $150 per month. Is there a "good" way to do this? Also, is there a way to raise the rent such that it will be effective when I take ownership, which should be in the next six to eight weeks? Thanks in advance.
If they are under lease you will be forced to honor them until they are up. I believe if they are not under lease you may be able to put it contingent in the contract for the rents to be raised. However it would not be a good idea to have 8 vacants on your first deal!
Hope it works out,
Scott
Catman,
Are you a member that gets PM's?? If so send me your e-mail adress.
Scott
You have to look at your state landlord laws, in Fl you need to give 30 day written notice (that is, if they are not on leases of course)
[addsig]
Probably not as I don't know what a PM is.
Quote:
On 2004-12-09 07:45, getgoing wrote:
Catman,
Are you a member that gets PM's?? If so send me your e-mail adress.
Scott
:-?
PM = Private message
Click on "Profile" of the person you want to send the message to, and then look for the "Send a private message" icon next to the "Location" line in their profile.
All good input but should I notify my tenants in writing? Tell them personally? How much notice do you give?
Check with the VT landlord laws on this, and I would be sure to get it in writing and certified.[ Edited by getgoing on Date 12/09/2004 ]
Raising rents can be tough. It's easier if you do some work on the building, new carpet, roof, whatever, then you can explain that's why the rents are going up, create a sense of value added. "Property tax increases" is a nice catch-all reason too. It seems cold and cruel to me to simply raise rents due to market forces, but, esp. if you base your buy on market rents, you've gotta do it. If different tenants now pay different rents, you can explain that you have to "equalize," rents, perhaps to satisfy your bank, or partner, or someone else.
May not apply to you, but if you can replace fridges, stoves, carpet, etc. before Jan 1, 2005 for the 50% initial write off (ask your acc't about this) you might have a plausible reason as well as a nice deduction payback.
Since I'm not in a hot market, I find it easier--esp. with good tenants--to just raise rents as vacancies occur, when necessary. Probably better to raise rents soon, as people are less likely to want to look for a new place in Winter. I have one tenant who helps a lot with work on my buildings for dirt cheap wages, so I don't plan on raising his rent!
A landlord I used to rent from would send out a form letter to all her tenants (after their one-year lease had expired and it when to a half-year lease) every six months. It stated that their rent would NOT increase, and would they want to extend their lease another six months. Every other half-year lease form mailed out WOULD raise the rent by $50. Pretty sneaky, eh?
Why do the rents have to increase by $150? If only because the market rents are higher then you have time to let your periodic rent increases catch up to the market.
If the reason for a large increase is to keep your property out of a negative cash flow, then a large increase will likely create vacancies and make your cash flow even more negative.
If you want to keep your existing tenants, raise rents slowly. Advertise your rent at market levels whenever you are filling a vacancy.
What steps have you taken to be sure that the current rents are really and truly $150 below market?