how to raise the rent

[srob]

Hi everyone! I have a question...I have an 8plex that I got in 2011. I have been lazy about raising the rent, they are 1 bedroom apartments with rents at 585/mo, but the going rate is about 650. The rental market is hot and I know it would be easy to find good replacement renters at market rate, but I don't want to shaft the current renters since  they are nice people. Is it too mean to raise the rent 70$ if I give them a couple months notice or would it be less of a shock to phase in the rent raise over year (35$ every 6 months)? Most are students or young people in their 20's.

[Another Reader]

Anytime you raise the rent for an existing tenant by more than a few percent, you run the risk of a vacancy.  Just because you have been lazy does not mean your tenants are prepared for a 10 percent increase.  In your shoes, I would raise the rent by $20-25 a month once a year until you get closer to market.

[cripzychiken]

Since they are students - do you have a lot of turnover around the school year?  Set rents for the new renters to the market price and make sure the lease has at least the ability for annual increases to avoid this situation in the future.

For the holdovers, if your leases say you can raise rent, then give them a 3 month notice (just to be nice) that rent will be raised by $XX per the annual increase in the lease effective in 3 months.  If it doesn't say anything about raising rents, then rewrite your lease, and when it is time to renew, have them sign the new lease.  With this also give them the heads up that when they renew rents will be going up by $XX (again to be nice so they aren't surprised).

Just ensure that the property is at or above market standard before raising rent (probably is, but just do a double check). I'd be ticked if I was living in a below average apartment and they tried to raise the rate on me. 

[Kwill]

Anytime you raise the rent for an existing tenant by more than a few percent, you run the risk of a vacancy.  Just because you have been lazy does not mean your tenants are prepared for a 10 percent increase.  In your shoes, I would raise the rent by $20-25 a month once a year until you get closer to market.

As a renter, that's what would seem reasonable to me. My last landlord sent a letter each year three months before the lease was set to end, giving me a deadline to say whether or not I wanted to renew the lease and telling me the new rent amount. That surprised me because past landlords were never that organized and never raised the rent, but I appreciated that he was keeping track of things and also responded promptly to maintenance issues.

One past landlord who lived overseas let lots of maintenance issues slide, let the lease go to an informal month-to-month situation after the first year, and didn't care who was living there after the first year. This was in a six-bedroom house shared by six students. In some ways this was easier, but I think he was frustrated that he didn't get to raise the rent, and we were frustrated that the house was falling apart around us. He trusted some friends to do his plumbing and maintenance work, but since he was overseas, he didn't see that there were leaking pipes (both water and gas) and bad roof repairs, etc. Also, credit checks on some of the replacement roommates could have really helped--there were some major problems. He was a nice man, but not such a great landlord. Good tenants will appreciate good landlords, I think.

[srob]

Thanks for the insightful replies guys. I can raise the rents according to the lease agreements, but I have not yet raised rents on existing tenants, just as turnover occurs a little bit.  I have a lot of tenants that have stuck around for a few years. I always thought I shouldn't raise rent on existing good tenants but my expenses are rising and they are staying...

I am a renter as well, and I almost expect a 10% increase after two years of renting here and would be ok with it. Maybe I am less sensitive bc I am in my 30's and not a student anymore, working full-time.

I think I will give them 3 months and phase it in so it is not such a shock as you suggest. Funny I thought I was doing them a favor by delaying the rent increase but now it just makes it a bit more uncomfortable for everyone. :(

Kwill I am a bit in between your two landlords, not quite as diligent as the one but I keep on top of maintenance, contracts, etc.
Cripzy I do try to keep them in good shape, but the apartments are old and that makes them a little more attractive to certain tenants I think--I try to maintain them without renovating too much to maintain their charm. I never have to advertise, they fill by word of mouth. (see pics)

[clarkfan1979]

I would do $30 (5%) and then do 2.5% every year. More than 10% would most likely result in vacancies.

[adamcollin]

It would be wise if you provide them with some extra amenities such as wifi,some appliances or additional furniture. This way, you will have less chances of losing your tenants. Properties with extra features ought to have higher rent.

[lemanfan]

Without being a landlord myself, but having experience from other forms of monthy billing businesses: 

Wouldn't it be a good idea to raise the rent / fee every year, even if by a very small amout?  That makes your customers used to that prices will change and the only question is how much.

[Mother Fussbudget]

Without being a landlord myself, but having experience from other forms of monthy billing businesses: 

Wouldn't it be a good idea to raise the rent / fee every year, even if by a very small amout?  That makes your customers used to that prices will change and the only question is how much.

That's how the complex I lived in for 5 years did it.  Every year they'd raise the rent by $100 or so.  Early on, they had monthly "renewal parties" in the commons / workout area on the 4th Saturday of the month.  Later on they stopped doing that to save $$

[powskier]

I only ever raise the rent by a "nuisance "amount, meaning it's just a minor nuisance to tenant and not enough to cause someone to move i.e $15-$35increase for a $800/mo(1 bdr) or $1600/mo(4bdr) . I raise rents about every 16 months -2 years for long term tenants or just raise it for new tenant. I only raise rents in keeping with increased expenses ( utilities, taxes) and in line with area market rents.
I like my tenants, I hate having to find new tenants or having a unit unoccupied. Having a unit unoccupied  eats up any gains a rent raise was going to make.