Long Term Tenant-Time to raise the rent?

[SEAK]

In our main residence we rent a basement 600sf one bedroom mother in law apartment. Heat, garbage, water/sewer, and snow removal are included. We've had the same tenant for 8+ years now and the rent has stayed the same at $1,100/mo during that time. We feel like it's long past time we raised the rent but feel bad doing so, mostly so we don't mess up the good thing we have going.  We have a tight rental market and guessing the apartment could easily be rented for $1,500+/mo. Tenant is very responsible, keeps to themselves, never has anyone over and is very quiet. They walk the rent check up to us on the 1st of every month, it's been several years since I've stepped foot in the apartment to fix anything (guessing the tenant is fixing things?), etc. We don't want them to move out if possible!

Our mortgage has gone up $325 due to increased property taxes and home insurance and garbage and water/sewer have increased about $75/mo. Figure our costs for our house w/ apartment have increased at least $400/mo not including any maintenance costs.

We thought about giving the tenant a few months notice and raising the rent to $1,250 to keep it better in line w/ other rentals around town (this would still be a steal of a rental). Our concerns are the tenant would possibly move out and we'd have to find a new renter or that they'll want more out of us fixing things etc. Or we just keep the rent the same and raise it whenever they move out and we get a new tenant?

Any other landlords face similar situations w/ a long term tenant and keeping rent the same for several years??

[Villanelle]

That's quite a large increase, which is the problem with not doing regular increases.  If you tell a tenant every year that the rent is going up by $25 or $50, they usually don't bat an eye.  When you tell them it is going up $150, especially when that's a pretty significant percent of the cost, it is more likely to ruffle feathers.  That's why we raise the rent to near FMV each year, rather than putting it off and then surprising them with an unexpected large increase.  They are more likely to resent a large increase than they are to appreciate no increase at all up to that point.  For most people, raising the rent $25-$50 most years is going to be barely noticed. 

I'd reach out, explain that you think they are a fantastci tenant so you've skipped any increase but that with yur rising costs, you simply can't do that this year.  Tell them that you need to rais it to $1250, and are giving them plenty of notice to help it out.  Point out that you value them and want them to stay, and hope that this works.  IDK if I'd mention, or not, that if I were listing it for a new tenant, it would probably be at $1500. 

Yes, you don't want to lose them, but if this is truly that far under FMW, they don't want to lose you, either.  Sure, there's the possibility that they will become more high-maintenance, but that's probably work an extra $150/mo.  (If $1100 was a competitive rate 8 years ago, my guess is that even $1500 is below MV now.  Tha't only about 4% annual increase, which seems low, given what housing and inflation have seen during that time.)

[Dicey]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

[SunnyDays]

^^^^^^^^^

What they said.  Be as open and kind about it as possible, but don't hesitate to raise the rent.  I'm sure the tenant is aware of FMR and knows they will not find another comparable place for even the increased amount.  I don't think you'll get pushback.  Going forward, increase  the rent every year.  If you want to show your appreciation for the tenant, randomly give them a reduced rent month once in a while.

[partgypsy]

Yes, more freq smaller increases are received better than 1large increase. A friend of mine loved his apartment. After a few years the landlord (I believed it switched hands) said they would need to move out for a month for improvements, and the new rent would be double what they were paying. So, he had to move.
 

[therethere]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

[Villanelle]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

I tend to agree with this.  I don't care how my landlord runs their business.  If his prices drop, is he going to refund me or drop my rent?  What matters to me is fair market rent. 

[Archipelago]

A few strategies I've used is to increase rent, but with lots of notice and having the increase spread over the course of a year. I'll tell tenants 3 or even 6 months in advance that rent is increasing. That gives them plenty of time to decide if they want to stay. I've never had people leave over a rent increase, most likely because I keep rents around $100-$200 below market value. Tenants are welcome to shop around but know they're getting a good deal.

I also spread the increase over time. If I was increasing from $1100 to $1200, it would look like this:

$1125 for 3 months
$1150 for 3 months
$1175 for 3 months
$1200 for 3 months

[Dicey]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

Our rentals are SFH's. They are updated and impeccably maintained. We would happily live in any of them ourselves. If our tenants need anything, we jump. We're in CA and our insurer has left the state. Insurance costs are expected to double, and you expect me to suddenly become a charity? How naive you sound.

If you're "quite upset", wait until some of these proposed rent control laws kick in. Your landlord not only won't do anything, they'll expect you to do your own maintenance.  See: Santa Monica.

[therethere]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

I definitely didn't say you should offer charity. And I was only offering my experience, not drawing conclusions on how your rental is maintained. I'm simply saying it would feel very condescending to have my landlord come to me and show me his property taxes andor  went up xxx no need to let the tenant know how your costs have increased. I'm sure they

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

Our rentals are SFH's. They are updated and impeccably maintained. We would happily live in any of them ourselves. If our tenants need anything, we jump. We're in CA and our insurer has left the state. Insurance costs are expected to double, and you expect me to suddenly become a charity? How naive you sound.

If you're "quite upset", wait until some of these proposed rent control laws kick in. Your landlord not only won't do anything, they'll expect you to do your own maintenance.  See: Santa Monica.

Hey now, I did not once say you should not increase rent at all or even that you should keep it below market value. All I said is it would be condescending to show your tenant direct numbers on how your costs have increased. I'm pretty sure they are at least slightly aware of the big changes that have been going on in the housing and rental market the past four years. Tenants are not dumb. I don't discuss with my landlord how much my expenses have increased or how little my annual raise was. Because it's irrelevant. The only things that matter in this equation is the condition of the unit and its respective market rent.

[Villanelle]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

Our rentals are SFH's. They are updated and impeccably maintained. We would happily live in any of them ourselves. If our tenants need anything, we jump. We're in CA and our insurer has left the state. Insurance costs are expected to double, and you expect me to suddenly become a charity? How naive you sound.

If you're "quite upset", wait until some of these proposed rent control laws kick in. Your landlord not only won't do anything, they'll expect you to do your own maintenance.  See: Santa Monica.

I think you are reacting to something that wasn't there.  They never said not to raise the rent; they said not to present an outline of all your costs as a way to justify raising the rent.

I think raising the rent is fine, and that's what I took from therethere's post, too.  It wasn't an objection to raising rent to FMV.  It was an objection to being sat down to see a list of landlord's expenses.  If FMV is $2500, then charge that. Whether your insurance has gone up 40% or your property taxes have skyrocketed, or your expenses have decreased because you just paid off the mortgage--that's irrelevant.  I don't want a restauranteur showing me the bill or the menu and a list of the cost of mushrooms and wages for wait staff.  Tell me my steak is $40 and if that's a fair price for steak, I'll pay it. 

[partgypsy]

I ditto what vilanelle said. I don't care if my landlord has a big mortgage or had additional repairs. He owns the property. That's his/her problem. What I care at as a tenant is, how big the jumps are, what the rent is compared to the rental market.

[Wolfpack Mustachian]

I agree with Villanelle, but I have a slightly different suggestion. Outline all the costs that have increased, then sit down with your tenant. Tell them how much they are appreciated and that you don't want to lose them. Ask what they are able to do to bridge the gap. If they love the place, you might be surprised what they are willing to do. Consider offering to spread the increases out over a given period of time.

One of our tenants gives himself a $100 rent increase every year. He's still a bit below market, but he takes care of things, and we love him, so we're happy to let it ride. We're not getting ahead, but we're not falling behind much, either.

Coming from a lifelong renter, I'd be very annoyed if my landlord emailed or sat with me to show me how his costs increased. I don't care how good of relationship we had. I don't care about the landlords cashflow and they're already making bank on appreciation in most places. It's poor taste in my opinion. If you want to raise the rent just determine an amount and just raise it. Don't discuss your costs because they are irrelevant. The only thing that really matters is market rent. Have you done any updating or non-necessary maintenance in their unit? You want to get it to market rate, but you also have to understand a market rate apartment has had a deep clean, new paint, new carpets, other non-urgent maintenance, etc. over the 8 years. They're likely living in generally the same condition and now you want them to pay significantly more without any updates.

I agree that smaller, predictable increases are much better than large jumps in rent. We were riding under market for quite a few years, but now the landlord is upping our rent 10% for a second time after nearly 10 years of predictable 3% increases. I'm quite upset. While I know that would put us at maybe $100-$200 under market still. But there have been no updates that haven't been urgent (burst pipes made a new bathroom) and the place has slowly fallen into disrepair.

Our rentals are SFH's. They are updated and impeccably maintained. We would happily live in any of them ourselves. If our tenants need anything, we jump. We're in CA and our insurer has left the state. Insurance costs are expected to double, and you expect me to suddenly become a charity? How naive you sound.

If you're "quite upset", wait until some of these proposed rent control laws kick in. Your landlord not only won't do anything, they'll expect you to do your own maintenance.  See: Santa Monica.

I think you are reacting to something that wasn't there.  They never said not to raise the rent; they said not to present an outline of all your costs as a way to justify raising the rent.

I think raising the rent is fine, and that's what I took from therethere's post, too.  It wasn't an objection to raising rent to FMV.  It was an objection to being sat down to see a list of landlord's expenses.  If FMV is $2500, then charge that. Whether your insurance has gone up 40% or your property taxes have skyrocketed, or your expenses have decreased because you just paid off the mortgage--that's irrelevant.  I don't want a restauranteur showing me the bill or the menu and a list of the cost of mushrooms and wages for wait staff.  Tell me my steak is $40 and if that's a fair price for steak, I'll pay it.

The part that stuck out to me that it seemed dicey was replying to was the part about the living conditions being the same. Insurance is a cost increase invisible to renters that could make rent increase without upgrades.

[Midwest_Handlebar]

I would send a list of comparable rentals in your area (I use rentometer) and ask them what they think is fair. If they refuse to give you a number I would offer $100/month below market. If they do give you a number you can negotiate from there. Doing it this way gives them a voice and an understanding of how much it would cost if they moved somewhere else.

If they give you a hard time about it, or start a pity party, don't resign with them. They'll resent you no matter what and it will only get worse.

[Dicey]

If you look closely, I was responding to lifelong renter therethere, who was making a lot of assumptions, telling me what I should do and acting like all landlords are terrible.

@Wolfpack Mustachian was closest to the pin to what I actually said.

However, I'm fine with y'all doing whatever you want. I was answering the OP's question and offering a suggestion, based on personal experience. That's what I do here.

[spartana]

Here in Calif I think you can only raise rent prices by a max of 10% (less in some cities) within a 12 month period. (or 5% or less every 6 months) so a big increase isn't allowed even if there's been no increases for years and it's below FMV. Only way to charge a higher amount is to evict the tenant by either moving a family member in (and they must live there for 12 months) or you'll be doing an extensive remodel. So make sure you follow your states tenant laws. Not sure what repercussion there would be but probably a law suit. Also have to give 60 day notice if you have a long term tenant over one year and probably some kind of financial compensation if they have to move out. Calif is VERY tenant friendly.

[InterfaceLeader]

Yeah, as a fellow lifelong renter I'm with therethere. This isn't a business partnership, I don't need to know or care about your running costs. All I care about is that the price is fair for the area, and that the place is maintained.

An indepth conversation about your costs is not of any use or interest to the renter, it would solely be to help the landlord feel better about themselves putting the rent up. Just put the rent up! It's not the end of the world.

A tenant could move out for a wide range of reasons, you shouldn't get attached.