Author Topic: How often do you raise rent and by how much on an existing tenant?  (Read 34536 times)

CCCA

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We have not raised rents on our rental house in the SF Bay Area very often (I think once over the last 5 years).  In the meantime, rents have gone up quite a bit (probably 25% in that time).  One reason we haven't done so is our tenant (for the last 5 years) is great and always pays on time.  We are happy and our tenant is happy. 


Since rents have gone up so much recently, we decided we should increase our rent, though nothing near the market rates. 
We informed our tenant that we would increase the rent by 4% this year.  And we are thinking we will keep the rent increases a regular annual event.  We live in an area with no rent control.


So I'm just curious if landlords here with tenants who are not on a lease (but just month-to-month) raise the rent on their tenants on a regular basis and just adjust the rent increase depending on market rates. 


Also what's the largest % increase in rent you have given an existing tenant?




KariO

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #1 on: January 05, 2015, 05:45:43 AM »
I will be really interested in hearing the responses to this as well! We are in a similar situation -- month to month agreement with a long-term tenant (5 1/2 years). We have not raised the rent but I would like to do so this spring, as property taxes have increased significantly during this period.

Our rental house is in the Madison, WI area, so much lower cost of living/rents, but our house is in a prime location in a prime school district. What is a reasonable jump in rent for an existing tenant? I think 5% would be manageable for him.



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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #2 on: January 05, 2015, 06:33:24 AM »
If the market rent is increasing, I increase the rent by 2 or 3 percent, because that's probably similar to the tenant's wage/salary increase.  I avoid increasing the rent by more than 5 percent, because that's the point at which tenants decide to look for a new rental, or in the case of good tenants that have been saving their money, buy.  I take the long view that says by keeping the rent for a good tenant a few percent below market, the tenant is more likely to stay.  They also tend to do the smaller maintenance items themselves, to avoid drawing the attention of the landlord.  The cost of a turnover, including rent loss, far exceeds the rent difference.

Annual rent increases are the way I do it.  More often and you look greedy.  Less often and you risk falling way behind in an increasing rental market.

chuckaluck

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #3 on: January 05, 2015, 06:33:39 AM »
I guess I look at things a bit differently.  Primarily back in the 80s and 90s, and a little bit in the 2000s, I owned rental properties in and around the Boston MA area.  Prior to purchasing the properties, I determined what I needed in monthly rent to cover all expenses with a bit of a cushion.  I'm sure we all did, and do, this.  But once I found a good, long tenant who took care of my property, I was very reluctant to raise rents at all unless there was a huge run up in real estate taxes, repair expenses, etc.  And when I was forced to raise rents, I made sure that I met with the tenant to explain the increase. The increase was based more on what I needed to maintain my original M2M buffer and not the market value or what I thought the renter could handle. At the time, property values in the area were going up rapidly year to year off of an already expensive price base.  I know I could have gotten more rent than I did.  But I also realized that my primary profit was going to be in the property appreciation when I sold and not on the M2M net (I did not want to own properties very long term).  By having a great happy tenant who was taking care of my property and who knew they were getting a bargain, I not only did not have to worry about them but I also did not have to worry about the property being vacant while I tried to find another great tenant (always hit or miss).  One or two months of vacancies wipes out yearly positive cash flows very quickly. The only time I would raise rents "automatically" was when a new tenant came in, and even then it was somewhat below market just to minimize the amount of time the unit stayed vacant.
« Last Edit: January 05, 2015, 07:32:18 AM by chuckaluck »

b4u2

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #4 on: January 05, 2015, 06:33:56 AM »
I am in the same boat. Tenant for nearly 6 years and we have never raised the rent. We have managaed to refinance the house and lower our cost but are we missing out by not raising the rent. Tenant is also month to month and has always been on time with the payment. We are in Cedar Rapids, Iowa.

KS

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #5 on: January 05, 2015, 11:40:36 AM »
Responding from the perspective of a reliable long-term bay area tenant: although I'm sure they won't be thrilled to see the rent go up,  they probably won't be terribly shocked either. Annual rent hikes, when kept reasonable, won't necessarily make you lose them. (We'd get cranky and probably leave if it was more than once a year though, there are places that do that.) Ours goes up about once a year, sometimes by a little more than you're suggesting, percentage-wise. But we're still paying quite a bit less than we would be for an equivalent place if we moved, so we stay. There will eventually be a tipping point where the rent increases make it not worth our while to put up with some of the issues with the building/apartment that the landlords ignore though, so if you really don't want to lose your current tenants I'd recommend treading carefully with the increases to make sure it's still a good value for them.


DSKla

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #6 on: January 05, 2015, 12:13:47 PM »
From a tenant standpoint: I've lived in my apt for 5 years. Right after I moved in, rent went from 950 to 1000. It hasn't increased in 4 years, but just recently I got a letter saying it is going up to 1100, or a 10% increase. While it would still be below market in the area and it would technically be just as fair as if it had gone up 3% a year, the big hike upset me.

I've been a model tenant, but now I am looking at alternative housing situations because my pay certainly did not go up 10%. I don't know if it was my landlord's goal to try and force me out with a big hike so he could rent the place for even more to a new tenant, but that has been the effect. If you like your tenant, I'd caution against a large increase, even if it's fair. Keeping it at 3% or so, and making the hikes more regular, would be better than springing a 10% hike all at once.

Cookie78

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #7 on: January 05, 2015, 01:03:25 PM »
I just had this 'problem' too. Great tenants who are friends of mine. They are good enough friends that they have the key to my part of the house in case of emergencies, and took care of my house while I was away for 6 months last winter.

They're been there 3 years and I haven't raised the rent, but I gave them a notice last week that I'm bumping it up, just for the amount of inflation over the last few years (800 to 850). Rental costs in my city have gone out of control in that time, so I think it's a fair deal. I hope they think so too because it would suck to lose them.

I do agree it's better to increase rent by small amounts regularly than large amounts less regularly.

b4u2

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #8 on: January 05, 2015, 01:17:20 PM »
I guess I look at things a bit differently.  Primarily back in the 80s and 90s, and a little bit in the 2000s, I owned rental properties in and around the Boston MA area.  Prior to purchasing the properties, I determined what I needed in monthly rent to cover all expenses with a bit of a cushion.  I'm sure we all did, and do, this.  But once I found a good, long tenant who took care of my property, I was very reluctant to raise rents at all unless there was a huge run up in real estate taxes, repair expenses, etc.  And when I was forced to raise rents, I made sure that I met with the tenant to explain the increase. The increase was based more on what I needed to maintain my original M2M buffer and not the market value or what I thought the renter could handle. At the time, property values in the area were going up rapidly year to year off of an already expensive price base.  I know I could have gotten more rent than I did.  But I also realized that my primary profit was going to be in the property appreciation when I sold and not on the M2M net (I did not want to own properties very long term).  By having a great happy tenant who was taking care of my property and who knew they were getting a bargain, I not only did not have to worry about them but I also did not have to worry about the property being vacant while I tried to find another great tenant (always hit or miss).  One or two months of vacancies wipes out yearly positive cash flows very quickly. The only time I would raise rents "automatically" was when a new tenant came in, and even then it was somewhat below market just to minimize the amount of time the unit stayed vacant.

I like this idea I guess because I don't want to chase my tenant away and possibly lose income looking for another renter. I do have long term plans that would be used from the equity/sale of this house when I retire which in the long run would be better than trying to make an extra $300 per year now if I raised the rent. I do know that if the tenant moves and I start looking for a new renter I will try to get higher rent than what I currently charge.

CCCA

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #9 on: January 05, 2015, 01:42:26 PM »
thanks for the insights and perspectives.  yes, we definitely don't want to chase away our tenant and have discussed with him the rent increase and making sure that he is okay with it. 


I think we will try to keep the rent increases an annual event and a reasonable amount (2-3%) even if they don't catch us up to market rates.  If the tenant balks at the rent increase at some point, we can figure out whether it makes sense to continue with the tenant without the rent increase or see what the market rates are at that time. 


I think we may be about $200-300/month below market rents, but it's a little hard to find exact rental comps.




Fishingmn

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #10 on: January 05, 2015, 02:40:40 PM »
Personally, I research rents every year and then keep them slightly under the market rent for renewals. If this is helpful this is the actual e-mail I sent my tenant on Sunday announcing a rent increase. Both tenants I sent this to for February end dates are renewing with increases -

We are less than 60 days out from the end of your lease on February 28, 2015 so I wanted to check and see if you want to renew or if I should list it for rent?

As you know, I haven't increased rent during the 3 years you've been there. I've looked at a couple other comparable properties including -

(sent links to postings on Craigslist but those are gone now - I feel this is important to show that they are getting a deal still)

Based on those I believe I will still be under the market if I raise the rent on your place to $1,085/mo should you decide to renew. This is about a 3% increase which is in line with what the Twin Cities average increase is and well below if you consider no increases the last 2 leases you signed.

I know you expressed concern with the rent last time you renewed and although I would hate to lose you I think I'll actually get more than the $1,085/mo if you should decide to move on.

Please let me know ASAP so we can either sign a new 12 month lease or I can begin marketing the property by mid-January to avoid any vacancy.


I hadn't increased rent before because I was still pretty much at market rent for him.

Zoot Allures

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #11 on: January 05, 2015, 06:10:52 PM »
Personally, I research rents every year and then keep them slightly under the market rent for renewals. If this is helpful this is the actual e-mail I sent my tenant on Sunday announcing a rent increase. Both tenants I sent this to for February end dates are renewing with increases -

We are less than 60 days out from the end of your lease on February 28, 2015 so I wanted to check and see if you want to renew or if I should list it for rent?

As you know, I haven't increased rent during the 3 years you've been there. I've looked at a couple other comparable properties including -

(sent links to postings on Craigslist but those are gone now - I feel this is important to show that they are getting a deal still)

Based on those I believe I will still be under the market if I raise the rent on your place to $1,085/mo should you decide to renew. This is about a 3% increase which is in line with what the Twin Cities average increase is and well below if you consider no increases the last 2 leases you signed.

I know you expressed concern with the rent last time you renewed and although I would hate to lose you I think I'll actually get more than the $1,085/mo if you should decide to move on.

Please let me know ASAP so we can either sign a new 12 month lease or I can begin marketing the property by mid-January to avoid any vacancy.


I hadn't increased rent before because I was still pretty much at market rent for him.

That email seems a bit defensive to me, but that's just me. Rather than trying to persuade tenants they're still paying below-market rent, I would just explain that I'm raising the rent by a small amount to keep pace with increased property taxes and other carrying costs. That's exactly what I told my own tenants a few months ago. I figure they do their own craigslist research and can reach their own conclusions about whether they're getting a good deal or not.

Fishingmn

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #12 on: January 05, 2015, 09:10:35 PM »
That email seems a bit defensive to me, but that's just me. Rather than trying to persuade tenants they're still paying below-market rent, I would just explain that I'm raising the rent by a small amount to keep pace with increased property taxes and other carrying costs. That's exactly what I told my own tenants a few months ago. I figure they do their own craigslist research and can reach their own conclusions about whether they're getting a good deal or not.

To each their own I guess regarding tone but I do disagree with 2 things -

1 - Explaining that you are raising rent because your costs go up really doesn't apply to what rent should be. All that really matters is how you rent compares to alternatives. If your property taxes double that doesn't mean you can automatically pass that on to a tenant. As a Realtor I see people do this all the time - "I need a certain price because of what I paid or what I want to get out of the house". A houses value is set by a willing buyer who chooses it based on the price of comparable alternatives.

2 - I think that most tenants at the very least will look at my comps. While some may also do their own research I think it's very important to provide comps to both get my own basis for the rent and to set a good reason for why you are suggesting the rent you are proposing.

monarda

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #13 on: January 05, 2015, 10:57:13 PM »
When I was in grad school, I rented a 3BR house, shared with 2 roommates (in the late 1980's) for $600. The rent stayed basically the same, maybe it went up to $675.  Then after 4 years, my landlord said rent was going up to $900 for "us" if we stayed, and that her "accountant made her" ask for the rent increase.  Needless to say, we left. Much too much of a jump for grad students, but rents were increasing wildly (in Boulder) at the time.  She rented the house that year for $1100! She encouraged me to buy a place.   I bought a condo, even though it was only a year before I graduated. Condo sales were also skyrocketing, I sold the condo after 2 years for a 20K profit.  I remember going to the city hall library, looking at public records on microfiche, seeing that my landlord owned 17 houses!  That made an impression on me.  :-)

Now we're on the other side of that, owning our own rental properties. We don't raise the rent much on long-term tenants, but we do make big rent increases  between tenants (10%, 15% or sometimes more to catch up to market rates). This works out if the tenant stays 2-3 years. We only have moderate increases if they stay 4+ years (2-3%). Keeping a good tenant is worth it. We've only had one tenant who stayed longer than that, and she was section 8.    Interesting though, when we think we're at market rate, we're probably still below what some others might charge, because our places rent in a day.  Our places are really nice apartments.  Renting this quickly probably means we're still undercharging.

To your question... 3-4%  is a reasonable increase for a long-term good tenant. Perhaps increase just every other year? Or since month-to-month, maybe every 18 months?
« Last Edit: January 05, 2015, 11:08:48 PM by monarda »

Mola

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #14 on: January 08, 2015, 11:23:58 AM »
I am of the "its a business" opinion of investment properties.  Charge your late fees, issue your "pay or quit" notices according to your local law, and increase rents by 2-3% ever year that the market warrants it.  I was at a rental association meeting and one person in the group had not raised rents on a long term, good tenant for 20 years.  The discussion leader did the math on the board and showed that if they had simply raised it 2% each year they would now have enough cash to buy a new house outright.  I think people get in trouble when they don't want to raise rents and wait 5 years and then are faced with a decision to make a big hike.  The tenant doesn't see a 10% hike every 5 years as the same as a 5 annual 2% hikes (only we compounding-conscious mmm'ers would recognize the 10% as better) .

With that said, its a business and maybe its a conscious part of your business to not raise rents.  I have a mentor who owns scads of houses and they promise to never raise rents while you are in one of their houses.  That's their decision to separate themselves in the market.  It's your business, but I recommend making it a business decision and not an ethics worry.

clarkfan1979

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #15 on: January 10, 2015, 03:11:47 PM »
There is a podcast on biggerpockets about raising rents. The recommendation is to raise rents about 1-2% on new tenants. They argue that this is still lower than inflation and is still a reward for a good tenant.  I have a college rental and I didn't raise the rent the last 2 years as a reward for the tenants being good. I now feel like this was a mistake. I could have easily raised the rent 1-2% the last 2 years and it still would have been below market value.

Tenants should also be less likely to move based on small frequent increases instead of infrequent large increases. I think people would be more likely to stay if you raised the rent 1% each year instead of 3% every 3 years. 

frugledoc

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #16 on: January 11, 2015, 06:33:12 AM »
I wouldn't raise the rent on a long term perfect tenant.   I think the hassle free nature of them staying there is worth giving a significant discount.

No voids, no hassle, property well maintained etc. 

If rents had massively increased then I might consider it but anything up to 10% - 15% I wouldn't bother.

clarkfan1979

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #17 on: January 11, 2015, 07:27:38 PM »
One of my friends rented a 1 bed/1 bath apartment in Chicago for 1150/month for 2-3 years. The landlord called to say that the rent was going to go up to 1400/month. He moved and didn't re-new the lease. The day he moved out he met the new person moving in and they said they paid 1600/month.

I think not increasing the rent in this situation would have left a lot of money on the table. 

DeanW5

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #18 on: October 10, 2016, 05:14:42 AM »
Friend of mine, who is a landlord,  either keeps rent the same or raises it by 3-5% per year. In some cases, itís reasonable to evaluate the market and see what others are charging.

Enigma

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #19 on: October 10, 2016, 06:03:49 AM »
Never - I do not raise rent on existing tenants but will raise rent on new tenants to market value.

CCCA

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #20 on: October 18, 2016, 12:27:55 AM »
It's that time of year again when I'm thinking about rent increases.  Looking at craigslist, it seems like we may be about $400-500/month under market (like 30-40%).  Our expenses have also been going up as well, so I'm thinking about a catch-up increase of $100/month, so we don't fall too far below market.  Still a very good deal for the tenant, but more like a 7% increase.

Primm

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #21 on: October 18, 2016, 12:51:22 AM »
Never - I do not raise rent on existing tenants but will raise rent on new tenants to market value.

For how long though? Asking because we lived in our previous rental house for 8 years. I wouldn't think not raising the rent for that long would be financially a good move.

Enigma

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #22 on: October 18, 2016, 08:10:52 AM »
For how long though? Asking because we lived in our previous rental house for 8 years.

Everyone will undoubtedly be different.  Almost all my properties are paid off (80%) and I have 26 units that pay me monthly.  Some of the units are in areas with a large surplus of rentals on the market.  Plus taxes and insurance haven't been going up very quickly in the areas I collect rent.  "I never raise rent" on the current tenants for the past 8 years but would do so if the expenses went up.

I wouldn't think not raising the rent for that long would be financially a good move.

Currently 100% of my 26 units are rented, 6 units have moved out and rotated with new renters since the beginning of this year (around 10 day turnover), and 80% of my rentals are paid off.  Long term renters benefit and new renters pay a higher 'rent'.  New renters this year pay more than the long term or current renters pay.

Average unit cost me around 40k, avg 2015 insurance around $500, avg 2015 taxes $1.2k, renters from 8 yrs ago paid around $500/month (new tenants pay around $640)
Over 8 years - (Income 48k/expense yearly ins & taxes 13.6k, avg 2k/unit in repairs and upgrades per year) Results in 32.4k towards the loan P&I over 8 years.

I am thankful that the 8 year long renter has almost paid off an entire unit.  Long term renters make me wealthier than short term/high turnover renters.
« Last Edit: October 18, 2016, 08:16:24 AM by Enigma »

Primm

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #23 on: October 19, 2016, 02:12:33 AM »
Currently 100% of my 26 units are rented, 6 units have moved out and rotated with new renters since the beginning of this year (around 10 day turnover), and 80% of my rentals are paid off.  Long term renters benefit and new renters pay a higher 'rent'.  New renters this year pay more than the long term or current renters pay.

Average unit cost me around 40k, avg 2015 insurance around $500, avg 2015 taxes $1.2k, renters from 8 yrs ago paid around $500/month (new tenants pay around $640)
Over 8 years - (Income 48k/expense yearly ins & taxes 13.6k, avg 2k/unit in repairs and upgrades per year) Results in 32.4k towards the loan P&I over 8 years.

I am thankful that the 8 year long renter has almost paid off an entire unit.  Long term renters make me wealthier than short term/high turnover renters.

Huh. I've never done the maths - I had a rental house years ago but realised very quickly that land lording is not for me, regardless of how profitable it is - but that's really cool. I guess I never thought about the fact that the house we were renting wasn't costing as much for the landlord either, even if he was still paying for a mortgage.

Villanelle

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #24 on: October 19, 2016, 02:39:30 AM »
My rental is in a location with rental shortages, so vacancy is not a problem. I recently read an article that said overall, rents are up 7% so far in 2016, and we were slightly under market at the start of the year.  For other reasons, I want my tenants out, so it's an easy decision.  We will raise the rent to market value, and they will have to move out.  (They get assistance, market value is less than the assistance will cover, and they are legally not allowed to pay more to make up the difference.)  It's a very significant amount-- at least $150 to $200 per month and perhaps more.  I can't justify just letting ~$2400/yr slip away.  I'd likely be raising the rent at this point even if they were amazing tenants, but probably by somewhat less in order to hopefully keep them.  In the past, I've let it go in order to keep a tenant, but those were generally smaller discrepancies I was eating. 

The place will probably be vacant for 2-3 weeks, as it needs paint, carpet and a very, very deep cleaning.  If the increase is $175 and is vacant 3 weeks, it will take me about a year to break even (when compared to keeping rent the same and not having a vacancy, plus a few other turnover expenses).  But that increase will be in effect essentially forever.  If I get a good tenant, I would probably not raise the rent on them for at least the first year, and after that I would see how much below market we were, and consider raising the rent, but keeping it below market in order to hopefully entice them to stay. 

Enigma

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #25 on: October 19, 2016, 05:02:20 AM »
My rental is in a location with rental shortages...

Be careful with areas that may have rent control.  I have properties in multiple counties.  Some are in locations with rental shortages.  It was unheard of with my father and brother when I set the rent above what they rent at (in a couple of cases almost doubling the rent for new renters).  Just doing that has my father reassessing his properties in the rental shortage area.  Luckily there isn't rent control in my area that would bar me from the change.

bacchi

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #26 on: October 19, 2016, 08:10:24 AM »
When property taxes go up 10%/year, and they do, that gets passed along to the tenant. That's about a 4% rent increase; I explain why to the tenants.

Villanelle

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #27 on: October 20, 2016, 12:24:39 AM »
My rental is in a location with rental shortages...

Be careful with areas that may have rent control.  I have properties in multiple counties.  Some are in locations with rental shortages.  It was unheard of with my father and brother when I set the rent above what they rent at (in a couple of cases almost doubling the rent for new renters).  Just doing that has my father reassessing his properties in the rental shortage area.  Luckily there isn't rent control in my area that would bar me from the change.

No rent control, thankfully.  I would sell immediately if rent controls were put in to place.  No way am I dealing with that.  Part of our decision to keep the property (originally our residence) when we moved was that it is a high COL area, with a disproportionate part of that being housing, and there was every indication that housing costs (and thus our rent) would continue to increase.  It has paid off,  The house has appreciated >25% in the 6 years since we moved out. Of course, we moved out when it was nearly at the bottom of an awful market. Rents have gone up nearly as much.  If we couldn't increase to reflect those overall market changes, we'd take our equity and run!

TheOldestYoungMan

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #28 on: October 20, 2016, 08:33:44 AM »
I have a target margin I like to keep.  On an annual basis I review all of the costs I incur in keeping the property, and pass along increases in costs to the tenant (where I can't manage it another way such as negotiating a better rate with whatever).  Generally, it takes awhile for rent to actually increase on a renewal, as I price a little bit of vacancy into the rent.

When you can provide a detailed list showing the difference in your costs now vs when they move in and show them that it accounts for 100% of their increase it generally goes fine.  Especially if they look around and realize they are still getting a good deal.

As a specific example, say I am raising rent $100/mo.  I show the increase in property taxes since their rent was last set is $112.00/mo.  Then I say "See?  I'm eating a little bit of the cost (not really because by it not being vacant I'm +thousands) but I would still like to make a little money.  Makes it easier for them to swallow the increase, lets them be angry at the gubbmint for raising taxes.  Everybody wins...I guess...

Minimizing hassle and vacancy has worked better for me than trying to squeeze out every last drop from the rent, so I only look at the "market" rental rates when a property is vacant.  Low information diet.

Remember when you used to rent, you expected it to go up every year.  So if you're a good guy landlord who doesn't raise it every year just because you likely can (if the increase in rent is less than the cost to move then it's like 90% of folks just hate you and pay up), make sure you're getting credit for that goodwill.
Like this:
Dear Tenant,

Thank you for being such a good tenant!  As you know, your renewal period is coming up, I have decided not to increase your rent this year.  Thank you for being frugal with your consumption of [these utilities I pay for] as well as timely informing me of [that shit that broke].  Costs in the area are going up, but in appreciation of you I am offering this (same$prevyear).  Please advise if you are staying so I can deliver your complimentary annual ice cream allotment, or if you are leaving so I can go over the departure process with you and list the property for rent.

Thanks again,

-TOYM

I worry that if I don't express my ability to raise the rent the tenant might come to expect that it will never go up.  I want them to live in constant fear of that increase, such that when it comes they can afford it, and when it does not come they are grateful and feel relief.  Or something.

Villanelle

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #29 on: October 21, 2016, 12:55:47 AM »
That's interesting.  As a renter, if a landlord sent me a letter saying my rent was going up $100 because his costs are going up $112, I would be pretty annoyed (and probably question his savvy as a business person, truthfully).  It's a bit like those people on the zillion real estate TV shows who say they are going to ask $250k because that's what they need in order to pay off what they owe, or to be able to afford the next house they want to buy.  As a home buyer, I don't care about your personal expenses.  I care about what the market dictates as the value of the item I'm purchasing.  I'd be much more receptive to a note explaining that in MyCounty (or better yet, your neighborhood if you can find that data), in the last [time since rental increase or since lease was signed], rents have increased 7%, which would be $112, but because [blah, blah], Landlord would like to keep them in the home and as such will only be raising rent by $100, to $XXX.  That tells me he's raising my rent because the house is worth more, not because he just needs or wants more money for whatever reason (whether that reason is increased taxes or the landlord's new Meth habit). 

If I was sent a letter saying rent was going up because his costs were going up, I'd roll my eyes, and then get busy looking at listings to see if he was close to market value, since that's what I care about.   If the rent was still fair, I would stay, but based on market forces, not his expenses.

Unstoppable

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #30 on: October 22, 2016, 08:01:59 AM »
Every year. It is in our lease that as a customer appreciation bonus the renewal rate increase is only $15 on sub $1000/mo properties and $25 on 1000+ properties.

You want long term tenants, but the last thing that you want is to fall $200 behind market and climbing, only to wish that they would move or to force them out just to get in line with market. I may not be top of market every time, but at least I am consistently moving in that direction at each renewal. I have to at last stay in line with inflation.

Plus the tenants like that they can plan, because they know what the increase is going to be if they stay.

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #31 on: October 28, 2016, 04:27:27 PM »
That's interesting.  As a renter, if a landlord sent me a letter saying my rent was going up $100 because his costs are going up $112, I would be pretty annoyed (and probably question his savvy as a business person, truthfully).  It's a bit like those people on the zillion real estate TV shows who say they are going to ask $250k because that's what they need in order to pay off what they owe, or to be able to afford the next house they want to buy.  As a home buyer, I don't care about your personal expenses.  I care about what the market dictates as the value of the item I'm purchasing.  I'd be much more receptive to a note explaining that in MyCounty (or better yet, your neighborhood if you can find that data), in the last [time since rental increase or since lease was signed], rents have increased 7%, which would be $112, but because [blah, blah], Landlord would like to keep them in the home and as such will only be raising rent by $100, to $XXX.  That tells me he's raising my rent because the house is worth more, not because he just needs or wants more money for whatever reason (whether that reason is increased taxes or the landlord's new Meth habit). 

If I was sent a letter saying rent was going up because his costs were going up, I'd roll my eyes, and then get busy looking at listings to see if he was close to market value, since that's what I care about.   If the rent was still fair, I would stay, but based on market forces, not his expenses.
[/time]

I understand what you are saying, but at least in my situation, I feel like there's a tension between keeping rents more or less the same and raising rent to market (which is well beyond a reasonable increase, like 30-40%).  Saying that expenses are going up by $X justifies why the rent increase isn't $0, but also with the understanding that it's also below what the rent would do if it matched the market increase in SF.  So I feel like explaining expenses is reasonable in this situation. 


While I like our tenant, we could probably get $400+ more per month if rented to a new tenant, so I'm not going to be too put out if our reasonable, but not high, rent increase causes him to move out.  In the SF bay area, there are lots of tenants looking for housing.

Slee_stack

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #32 on: November 08, 2016, 01:39:27 PM »
I raise rent on every lease renewal, presuming the market justifies it.

Overall, its a low increase to loyal tenants.  2% / year on average.

jwright

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #33 on: November 09, 2016, 08:58:37 AM »
Not residential, but all of our commercial leases include a 3% rent bump per year.

Guesl982374

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #34 on: November 09, 2016, 02:50:59 PM »
Every year. We follow roughly the market price. As others have said, it's a business transaction and the market dictates what an apartment will rent for.

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Re: How often do you raise rent and by how much on an existing tenant?
« Reply #35 on: November 10, 2016, 10:46:14 AM »
We haven't been very consistent with increases. Our PM is also a bit lax. We are in a VERY hot market in which rents just keep going up, and up, and up. Its crazy!

We are FIRE-ing in Jan and I insisted we review ALL rents and get them updated.

We have one building with three units that we are working on. there are two 1b/1ba units that we are raising $50. One couple came back saying they cannot pay $50 and asked for $25. They claim to be house hunting and plan to be out in March. They have been M to M for 3 years without a raise. I wanted to hold firm to $50, but my DH is a softie. He said 6 mos at $25 but then we will be upping another $25 after 6 mos.

The upper unit in that building is HUGE. We had been told that the tenants were leaving the military and have been waiting for them to put in their move notice. Which they just did. They are out 12/9. This unit will likely be increased $150 or so.

We need all rents set so we can slow travel a year with "hopefully" little rental activity. Our PM has been handling just about everything this year so we can have a good idea of the cost for them to handle repairs etc. So far so good on that front.

We never increase by a %,  it is always using market analysis and then we evaluate how much we want to keep the tenants, etc. We do push for year leases with the rent increase. With no lease it does go up a bit more.

We have 8 total doors in 3 multi-unit properties.