Why are some landlords stuck to collect below market rent price?
Why are some landlords stuck to collect below market rent prices?
Here are three major reasons a landlord is likely to collect less rent than the market and what's the solution. Welcome to Wealthy Wednesday.
Reason number one, you probably inherited a tenant when you bought the property and the tenant is probably living there on this property for a long time and never raised the rent or whatever the history, and you are inheriting that same rent they were paying the previous landlord. When you buy a property with a tenant, make sure that you check with your real estate agent that they are paying the market rent. If not, before you even close the property, have the previous owner give a proper notice to the tenant to introduce you and in that letter mention that increment of the rent so that's the way they will be well prepared.
Reason number two, you may have a tenant in your property but you never raise the rent because they're paying on time, they're a good tenant. Or maybe it's a paid-off property and you don't have much expense, so you didn't bother to raise the rent. Slow increment every year and probably it's been ten years, seven years, and they are not paying the market rent. So in that case you have to make sure that you definitely have a current lease and also in that lease, there's a clause that at the end of the lease when you go to renew the lease, a percentage of the rent will increase. So everyone is on the same page, there's no problem and the tenant will expect that increase on rent.
Reason number three is a long-term month-to-month tenant. It happens many times. The landlord gets a lease with the tenant, they are good tenants, they're paying and for whatever reason they never renew the lease. Now automatically it becomes month-to-month, and there's no lease in place. I saw many times it happened and the tenant is paying the same rent. You're getting the rent and you're happy. Suddenly after a few years, when the taxes went up, the insurance went up and you think, oh my god, I'm getting less rent, now my expenses are high. So definitely you have to have a lease and in a residential property, the lease cannot be more than one year term. The commercial property normally has three or five years leases but not residential property. Make sure your lease is one year or less and every year you're renewing the lease. So that's the way it's a lease in place and the increment of the rent in place.
Hopefully, this information is going to help you collect the right amount of rent and grow your wealth. My name is Shawn Bhakta, from REMAX Presidential, South Florida Home Finder Team and I'm glad to help.
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