How to Raise Rent & Protect Yourself

Ashley Kehr:
You got a message from someone you’ve never met asking if you’d sell your house. Before it even hit the MLS, do you know how to evaluate that? Do you even know what your property is worth off market and what question should you be asking before you even sign anything?

Tony Robinson:
Today we’re answering three questions straight from the BiggerPockets forums covering what to do when you inherit a tenant mid purchase, how to evaluate whether short-term rental is worth it in a saturated market, and how to know when you’re actually ready to scale from one door to …

Ashley Kehr:
This is The Real Estate Roofing Podcast. I’m Ashley Kerr.

Tony Robinson:
And I’m Tony J. Robinson. And with that, we’re going to jump into our first question today, which comes from the BiggerPockets Forums. Now, this question says, “I just closed on a single family rental.” Congratulations, by the way, and found out that the current tenant’s lease isn’t up for another seven months. The previous owner never mentioned this. This tenant has been there for three years, pays on time, but the rent is $300 per month below market value. I want to raise the rent when the lease expires, but I’m also scared of losing a reliable long-term tenant. How do I approach this situation as a brand new landlord inheriting someone else’s setup? All right. I love this question because I get to use my favorite phrase, which is an estoppel agreement. So if you’ve been around for a while, I’ve learned how to both, what that word is and how to spell it on the podcast.
But Ash, for our listeners that maybe aren’t familiar with that, break down what an estoppel is and why it might be beneficial in situations like this.

Ashley Kehr:
Yeah. So this is too late for this person asking this question, but before you actually close on the property, you should ask the seller if you can give an estoppel agreement to the tenants. And this is basically a forum that the tenants are filling out with how much rent they’re paying, when their lease expires, when did they move in? Do they have any pets? What appliances belong to them, what utilities they pay, which ones the landlord pays. And basically you’re taking the information they are telling you and you’re verifying it with the lease agreement or with what the landlord says. And that way, if there are any discrepancies, you can figure it out before you actually close on the property. So if a tenant fills out and says, “Hey, I pay $300 a month, but I own all the appliances.” But the landlord is saying, “No, I own the appliances.
You’re buying them with the property.” You can figure out that situation and how to handle it before you actually close on the property. Because if that tenant moves out and all of a sudden you have to buy all new appliances,
That could be a big chunk of money out of your cashflow that you need to cover to be able to rent it back out. So try and do that always when you purchase a property that is not vacant and has tenants in place. What you can do now is it really depends on your state laws. You could always offer a lease. If they agree to the renegotiation of the lease and they sign the new lease without thinking they’re getting kicked out and things like that where they’re signing it under false presences and they agree to the increase, but most likely you cannot raise the rent until their lease has expired. And in some states, there’s even regulation as to how much you can actually raise the rent on them. So even if they’re $300 below market, it may be several years before you could actually even bring it up to market because of those regulations and those caps on raising rent.
So the thing I would do is give them the most notice you can. So I would give them a lease renewal now that starts in the seven months. So that way, if they decide that they’re not going to accept that lease agreement, you’re also going to want them to sign a form saying that they’re going to terminate their lease when it expires. And you can also give them the option to terminate it early if you wanted. I usually don’t. I usually let it go, the period, but if you wanted them out so you could get somebody else in there, you could do that too. But you give them those two options and it’s their option if they decide to renew at the new price or if they are going to vacate the premises and are not going to accept the new lease agreement.

Tony Robinson:
Yeah, Ash, all great points. I think the only thing I want to add to that is just to also do the math. You said yourself, this is a reliable tenant. They’ve been there for a long time. I guess we won’t know just yet if they’re the kind of tenant that causes a lot of headaches, but assume that they’re just an all around solid tenant. There’s also, I think, some peace of mind math that we can incorporate as well. At $300 per month below market value, I mean, that is a significant amount that’s $3,600 per year in potential risk or missed rental income. But you also have to compare that against, okay, if I do let this tenant go, how long do I think I’ll be vacant for this listing? And let’s say that your rent is maybe 2,000 bucks per month and you’re vacant for two months.
Well, you’ve just eaten up for that entire year, all of that potential extra profit you’ll gain by getting to market value. But hey, if every rental unit is gone before it’s even fully vacant, well, then maybe we’ve got a really good case there to relist this at the new price. But as you have that conversation, Dion McNeely, who we’ve had on the podcast a few times, you’ve spoken toBecon. I love his approach, what’s called the binder method. We won’t go into it in detail here, but if you just search the Real Estate Ricky YouTube channel for binder method, you should find our episode with Dion McNeely and he walks through how he actually gets the tenants to agree to a rent increase and he’s just presenting them with options. So it’s a really, I think, unique way to be able to raise the rent while still keeping a really good relationship with your clients or with your tenants.

Ashley Kehr:
Coming up, short-term rentals are everywhere right now, but is it actually the right to move in a market that’s already flooded with Airbnbs? We’re going to tackle that question next right after a word from our show sponsors. Okay. Welcome back. So now that you know how to handle a tenant you didn’t choose and how to increase their rent, let’s talk about a strategy a lot of rookies have questions with in our wrestling right now. Okay. So this question comes from the BiggerPockets forums and it says, “I’m analyzing a property in a beach town that I think could do well on Airbnb.” But when I search the area, there are already hundreds of short-term rental listings. The long-term rental numbers don’t work as well, but at least they’re predictable. How do I decide if short-term rental is still worth pursuing in a saturated market and what data should I be looking at beyond just the number of listings?
Well, good thing. We have our in- house analysis, non-paralysis, Tony J. Robinson here to break down analyzing a short-term rental. And first of all, Tony, saturated markets, yay or nay. This is rapid fire here. Yay or nay.

Tony Robinson:
Yay.

Ashley Kehr:
Okay. And then we’re going with software. Off the top of your head, what’s the first tool, the first piece of software that you need to actually start analyzing this deal and get the numbers and the data?

Tony Robinson:
Air DNA. Easy.

Ashley Kehr:
Okay. Okay. Now tell us more.

Tony Robinson:
I think the word saturated is a bit of a nuanced phrase. I think a lot of people throw that word around without understanding the different layers or things that go into saying whether or not a market is actually saturated. Just because there are a lot of listings doesn’t mean that a market is saturated. There could be just a lot of demand in that market as well. So I’ll break it down. The things that I look at to actually gauge whether or not a market is quote unquote saturated or if there’s maybe an imbalance between supply and demand. I do look at the number of listings, but not just the raw number of listings. I look at how those listings have changed over time. What is the percentage increase in a market over the last, call it three years of the number of listings in that market and what rate is it increasing at?
It’s not bad to see listing growth in a market because it means that more people are coming in because maybe there’s more opportunity. But then I compare that number to the actual demand in that market. And when you use a tool like AirDNA, you can actually see across an entire market how many nights were actually booked for that market. And if I go back again over the last three years and I see that supply has been growing at 4%, but demand has grown 10% over that same timeframe, well, that’s actually a really good balance, right? Demand is actually outpacing supply. In other markets, maybe supply is flat, but if demand is decreasing 3% year over year, that’s a bigger issue, right? So I’m not just looking at listings in isolation or demand in isolation. We need to look at them together, understand the trends between both, and then understand what that balance actually looks like between the two of them.
So supply, demand, and the other things I look at is across the entire market, how is occupancy changing, how is the average daily rate changing? So if I can see a market where there’s steady growth in supply, there’s steady growth and demand that’s hopefully at or above supply, and I’m seeing healthy growth and occupancy and average daily rates, to me, that is a market, even if there are hundreds or thousands of listings in that market, that there’s a good balance between supply and demand and therefore not “saturated.” All right guys, we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the Real Estate Rookie YouTube channel. You can find us @realestaterookie, and we’ll be back with more right after this. All right, let’s jump back in. Our final question is for anyone steering at their first deal, wondering if they’re actually ready or maybe already trying to figure out when the second one should happen.
So the question says, “I bought my first rental property eight months ago and everything is going well. Tenant is solid, cashflow is positive, and I’ve got some reserves built up. I keep hearing that I should scale, but I don’t know what that actually looks like or how to know when I’m ready. How many doors should I have before I try to grow? And what does scaling actually require that most rookies don’t plan for? ” This is actually a good question. No one really talks about how do I know if I’m ready to scale. But first, let me say, the fact that you’ve got a solid, we’ll call it like you’re on base, maybe not a home run of a first deal, but you made the first base with your first deal. That is a great starting point. You said you’ve got reserves built up, cashflow positive, so you’ve learned a lot.
I think when we talk about scaling, what it really comes down to me is more so what are your goals as it relates to real estate investing? Is this something that you’re doing maybe in the background to help supplement your retirement? Is this something you’re doing to maybe build cashflow aggressively? Are you doing this because you want tax benefits? And depending on which one of those things is really motivating you to invest in real estate at all, I think will help you decide what type of scaling makes the most sense for you. Because I know some people who invest in real estate and they’re high income earning W2 folks who enjoy what they do. They have no desire to leave and they plan to do this for the rest of their lives. For those people, scaling maybe looks like buying one property every one to two to three years and just letting it build cashflow or build appreciation and letting that cash flow stack.
For other people, they want to move more quickly, right? They want to get into this full time. They want to make this an active business. Their approach is different. So for me, I think scaling the first question you have to answer is, what do I actually want out of this?

Ashley Kehr:
I think the problem is in this question is that you’re coming at as people are telling you, “This is what you should do. You should scale.” And that’s the problem that I had, as in I thought I should be doing this because people were telling me to do this or people were doing this and I saw them doing this on social media and I thought, “I need to get to that point.That’s the next step.” And just like Tony said, you really have to evaluate what your own progression and what your why is and what you want out of real estate. So you’ve already got one duplex. I think a really great next step would be just to buy another duplex. I think it is really important to build a solid foundation of what you know, what’s working for you and what you can be successful at.
So you’ve already got one deal that is working for you, replicate that. And yes, it’s the boring way. It’s not flashy, it’s not shiny, it’s not the hottest new strategy of 2026, but that is going to help you down the road. If you do decide to take on a different strategy to pivot or the market changes, you have to pivot, but if you have that strong foundation, it’s really going to help you. And the biggest thing is don’t forget about your lifestyle. Don’t forget about the things you want. If you start growing and scaling too fast, that’s going to eat up more of your time, more of your energy and focus now on building systems. So as you’re buying this second property, literally document every single thing that you are doing so that when you go through it for a third time, you have your whole process to follow that you’re not forgetting things, you’re not getting overwhelmed with stuff and you have it all together.
One thing that I didn’t do for a really long time, and it’s the number one thing that I do now is a utility sheet. So probably my first 10 properties, I didn’t do this, but I am, as soon as I’m setting up utilities, pretty close to closing, I have a sheet that, what’s the name of the company, what’s the account number, how do I pay it? Is there a login? What’s their website? What’s their phone number? Where is the meter located on the property? What is the meter number? So it sounds like something so simple, but all of these little simple processes and tasks that you can put together and document will make your life so much easier down the road. So I think that’s something you should focus on now is like building out those systems just for that first property. What are some things that you can do now and then slowly take your time into buying that second one?

Tony Robinson:
I think the last thing I’ll add, Ash, is just from a timing perspective, you’ll also know if you’re ready if you have enough cash to actually just buy that next deal. And it sounds like you’ve got cash flow coming from this property that maybe you don’t need because you’ve got a job that you’re working. Let that cash flow continue to grow and then save whatever else you can continue to save from your day job. And if you look up in another 18 to 24 months and you’ve got another nice pile of cash, well, then there’s your sign that I’m ready to buy that next deal. So I think a lot of times we try and overcomplicate the idea of scaling, but sometimes it’s just as simple as save money, save your cashflow, buy a property. Now you’ve got more cash flow, save some more, buy another property.
And it really starts to snowball because when you bought your first deal, you got zero properties helping you save for that first one. When you buy your first deal, now you’ve got one property helping you. When you buy your second deal, now there are two properties helping. So each property helps fund the next one if you save all of that cash flow. So don’t overcomplicate it, right? Just save, buy, repeat.

Ashley Kehr:
Thank you guys so much for listening to this episode of Real Estate Rookie. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.