Rent Is Lower Than Market

There are a lot of buildings where rent is significantly lower than market rent because the reluctiance of tenants moving out. When these building are for sale, the sellers have to go for lower price than similar buildings that have higher rent. This is a good opportunity if the buyer can hold the building for a while and gradually increase the rent under the rent control. For the market I am in, if a tenant does not move, the rent increase will be 2% + inflation; but if the tenant moves out, the rent can be increased to market rent for the next tenant. Some buyers of these buildings will think out of the box to make the long-term tenants move to increase the rent.

Once the rent is increased, the rate of return improves dramatically, and the building suddenly is worth a lot more.

Hey I just found another business model!