Author Topic: Tenant has expressed interest in renewing Prop Mgr wants to raise the rent  (Read 3981 times)

clutchy

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So the tenant likes the property and has expressed interest in renewing.  The property manager has suggested we raise the rent by $100/mo which is about 6%. 

Personally I'm more interested in keeping a happy and longer term tenant than squeezing more out of them.  I also think we'd be getting into a little bit of the upper rates which might make them consider moving.  This is a somewhat competitive market for rentals with a large pool of renters available.

Has anyone ever offered a lower renewal for a 2 year commitment? 

I could float the property indefinitely w/o a renter but obviously I don't want to do that. 


The property offers mild cash flow, good equity building and significant tax advantage for my income bracket. 

What would you do?

jackiechiles2

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I'd try to raise it the 6%.  If the tenants balk, come back with 3%.

Sibley

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I'm a tenant. If my landlord tried to raise the rent more than I considered reasonable, I'm not going to discuss, I'd just move. In fact, I did move last time. and I'm one of the tenants you want.

Make sure you know what the true market rate is and use that as a guide.

Another Reader

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My experience has been that at the six percent increase level, tenants will seriously consider moving.  Their income likely did not go up six percent in the last year, so the big increase will get their attention.

The cost of a vacancy is the lost rent for the time the unit is vacant plus the rehab costs to get the unit rent ready.  What has the market done since the tenant moved in?  Are market rents for similar units at or above what their rent will be after the increase?  What will it cost to get the unit rent ready?  Often it makes sense to increase the rent less when you look at the turnover costs.

Generally, I like to stick to 2 or 3 percent unless the market rent is up 10 percent or more and there are market wage/salary increases that support a larger increase.  I would rather have a known, stable, and happy tenant than the possibility of a couple percent higher rent and a turnover.

jackiechiles2

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I'm a tenant. If my landlord tried to raise the rent more than I considered reasonable, I'm not going to discuss, I'd just move. In fact, I did move last time. and I'm one of the tenants you want.

Make sure you know what the true market rate is and use that as a guide.

That's a good point.  3% is probably somewhat of a safer bet imo.  The cost and time it takes to move is rarely worth undertaking over $50 a month.

James

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I would suggest the 3%, but if you feel the 6% is justified you could plan on another increase next year and let them know a bit earlier next time.


If you are really happy with the tenant and want a long term lease, maybe share with them the planned increase, but offer to skip the increase for two years if they wish to have a two year lease. Let them know you would wait to adjust their rent at that time. But in 2 years what is the correct rate going to be? If 6% is justified now, then maybe 10% or more is justified in 2 years. But would you really be willing to go up 6-10% then? So maybe best to figure out the correct market price and make the small adjustments rather than trying to lock them in for a long lease. Just depends on your priorities at that point.

CommonCents

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I'm a tenant. If my landlord tried to raise the rent more than I considered reasonable, I'm not going to discuss, I'd just move. In fact, I did move last time. and I'm one of the tenants you want.

Make sure you know what the true market rate is and use that as a guide.

+1

I moved over about that same rent increase.  We too, had a rent around 1700 I think, and the increase was going to be $75 or 100.  We did make an effort to write a letter, got a no response so we moved.  If we had been told $50, we might have stayed.  In the future, I'd probably just move w/o writing the letter (although I own now).  We figured we had two years left in that city (I was in grad school) and they were likely to raise it again the next year when we'd have even less incentive to move.  We also felt that size increase was unwarranted by the market, particularly as a restaurant was going in downstairs in the building over, increasing noise for us.  To avoid it happening again, we signed a 22 month lease at the next place.  The move cost us $800 and we found a smaller but cheaper place by $100 I think, in a better location, so probably saved $3000 or $1500 each.

Did the property manager give a reason for the suggested rate increase?

If you like the tenants, they pay on time and are reasonable, don't raise by that sum.

AJ

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When I was a tenant, I liked when my apartment complex gave me options. I was told that my lease was expiring and I could:

A. Let it go month-to-month at a significantly increased rate
B. Sign a shorter 6 month lease at a moderately increased rate
C. Sign the full 1-year lease at a slightly increased rate

I know it sounds dumb, but it made me feel like I was getting a "deal" by signing the lease, even though my rent was going up.

feelingroovy

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Unless your costs have gone up or the tenants have been there a long time without an increase, I would just keep it the same. I am assuming they are good tenants.  Good tenants are worth a lot.

Funny story. We once raised the rent $5. The tenants responded with a letter about how insulted they were because their previous landlord had lowered the rent for good tenants who paid on time.  They then demanded a list of improvements to justify the higher rent.

We laughed and laughed.

gimp

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As a renter, I'll second that - I wouldn't negotiate, I'd just leave.

GrayGhost

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Re: Tenant has expressed interest in renewing Prop Mgr wants to raise the rent
« Reply #10 on: January 24, 2015, 12:12:31 AM »
A single month of vacancy following a turnover is a lot of expense and trouble to risk. I'd keep rent the same and ask the tenant to sign a two year lease. And frankly, at the end of those two years, if they continue to be good tenants, I might very well keep rent the same.

sdp

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Re: Tenant has expressed interest in renewing Prop Mgr wants to raise the rent
« Reply #11 on: January 24, 2015, 10:45:12 AM »
once I get a good tenant, I try not to change the contract for as long as possible.  If they have been there for more than 5 years, I go over to their house and we talk about it, but I try to stay as predictable as possible.  If you have a good thing going, good long term tenants, positive cash, why mess with it?

clutchy

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Re: Tenant has expressed interest in renewing Prop Mgr wants to raise the rent
« Reply #12 on: January 27, 2015, 08:20:38 AM »
A single month of vacancy following a turnover is a lot of expense and trouble to risk. I'd keep rent the same and ask the tenant to sign a two year lease. And frankly, at the end of those two years, if they continue to be good tenants, I might very well keep rent the same.

This ^ is what happened. 

I offered a 2 year @ the same amount or a 1 year @ $50 more. 

They opted for the 2 year lease. 


I appreciate all the suggestions.  They are good renters and I prefer the stability to the fluctuation. 

A 1 month vacancy and the cost of property mgmt turnover would have been about $2500.  That's more than 2 years at the increased price.... 

from a risk management perspective that would not have been worthwhile.  We've had massive turmoil this past year mostly related to positive things but it's put us in a different place. 

I never thought owning a rental would be so easy....