Do you ever raise the rent amount in hopes the tenant will leave?

For those of you who have taken over properties with well below market rents:
Do you try to bring the rent up to market rent by several moderate raises over the course of a few years or do you raise it high enough where you think the tenant will leave and you’ll be able to get market value out of a new tenant?
We’re looking at a duplex. One side is a 2/1. The other is 1/1. The 1/1 just got rented for $450. The 2/1 is occupied by someone who has lived there for several years and is only paying $275/mo. While I appreciate the fact they’ve lived there so long, their rent is so far below market (about $550-600 for this unit) that the numbers don’t look as good for this property as they should.
Just wondered what others’ experiences are for this.

Since the rent is about half what it should be, I would have a talk with the tenant. Explain to them that their unit is FAR below the market rent and that you’ll have to slowly raise it to get it closer to normal. If it were me and I wanted to keep the tenant, I’d raise it $50 right now and then $50 ever 6 months until you get close to market value. I’d probably stop at $50 below market in recognition of the length of time they’ve been in the unit.

If you don’t like the tenant or just want them to go, just raise the rent to market and they’ll almost surely leave.


When you buy a property with tenents already in the unit, then do you have to honor the lease or do you create a new one?

Thanks Mike. I like that idea. I haven’t seen anything in state law about how much or how fast I’m limited to raise it. The building is absolutely beautiful and priced pretty well for where the rent should be. I think the only reason it has been on the market for awhile is because the rent for the one unit is about 1/2 of market rent. It also sounds like the tenant hasn’t been exactly helpful in letting people in to see the inside. The Realtor claims it can only be shown after 4:30pm by appt. The tenant is probably scared of the sale because they now the rent will go up.

If the tenants are on a lease with a defined term (say they’re 6 months into a 1 year lease), you usually have to honor the existing lease. If they’re on a month-to-month, we just make them sign our m2m lease when the ownership changes. You’ll be amazed at how many people out there don’t even have written leases. Our apartment building was all verbal as well as 3 out of the 4 houses we’re buying now. We put everyone on a written lease. It’s silly not to.

 To answer your question, lease agreements remain valid when a landlord inherits tenants by buying a property.
 Typical lease agreements are for 6 months, 9 months or 1 year.  When the lease agreement ends, the tenant goes to a month to month agreement by default.  This should be in the initial lease agreement, if it is not, find a different form.
 Tenants who are on a month to month lease agreement have fewer legal rights than tenants on a term lease agreement.  A landlord can give the tenant notice (60 days in California) and have the tenant leave for remodeling or because the landlord wants to move into the property.
 If the tenant signed a, let’s say, one year lease agreement initially, and the year is over and the tenant is month to month, the landlord can offer the tenant options at this point, for example:

The tenant may stay on a month to month agreement for $(market rate +15-20%)
The tenant may sign a 6 month lease agreement for $(market rate+5-10%)
The tenant may sign a one year lease agreement for $(market rate)
Sometimes, it is in the landlord’s best interest to leave the tenant on month to month lease agreements because it is easier to make tenants on month to month agreements move out.

Absolutely, We do this when we buy properties that we plan to upgrade or rehab. You are subject to the current lease terms. A good thing to do is to send out notices of impending increases when the lease term ends. You can also offer discounts for moving out early or help pay moving expenses.