Author Topic: Question on raising rent  (Read 2747 times)

sbaTexas

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Question on raising rent
« on: January 02, 2017, 03:29:06 PM »
At the end of the lease, is it normal to offer a "month to month" higher rate but also offer a "if you sign this new lease, you get this lower rate" option?  both would be rent increases over the current rent. .. .but I was thinking about making the month to month a 5% bump whereas the new lease would be a 3% bump.  I just don't want to get stuck in a perpetual month to month situation once the current lease is up.. .. probably overthinking this but are these rate increases in line with what you guys do? 

NoNonsenseLandlord

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Re: Question on raising rent
« Reply #1 on: January 02, 2017, 04:17:37 PM »
Sometimes I increase, sometimes not.  Sometimes renew a lease, sometimes go month to month.

Another Reader

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Re: Question on raising rent
« Reply #2 on: January 02, 2017, 05:43:05 PM »
If the tenant is a good tenant and wants to stay, I offer a lease renewal.  Before I determine if there should be a rent increase or how much, I look at the market.  Generally, I don't increase rent by more than three percent, because that's what most people get as a wage/salary increase.  I also consider the cost of obtaining a new tenant for the specific property.  If the property is due for major improvements but the tenant is solid and wants to stay, I might minimize the increase to delay the work while accruing the needed capital.

I will work with tenants on shorter term renewals where a job transfer is expected or they are finishing a PhD or post doc program. In limited cases, month to month is acceptable, although I try to avoid move-puts from the end of September through the end of December.


Cwadda

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Re: Question on raising rent
« Reply #3 on: January 03, 2017, 08:18:33 AM »
If the tenants are good, I'd offer the same rate 100% every time.

Good tenants >>>>>  a little extra $

Landlady

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Re: Question on raising rent
« Reply #4 on: January 03, 2017, 12:15:55 PM »
I like your idea of raising rents by % and offering a lower % for a signed lease. This seems fair and something you can disclose at the beginning of the lease so that your tenants know what to expect by the end of their lease.
The trick, in my opinion, is to find the right number where a good tenant will stay because the increased amount is not worth the hassle of moving. Moving can easily cost $500 for time, boxes, truck rental, cleaning supplies and the possibility of not getting the security deposit back because of damages. Also never underestimate the headaches of moving... no one enjoys it.

SeattleCPA

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Re: Question on raising rent
« Reply #5 on: January 03, 2017, 12:29:51 PM »
If the tenants are good, I'd offer the same rate 100% every time.

Good tenants >>>>>  a little extra $

I think it's important to bump prices for all sorts of stuff just as a general policy.

Here's a blog post I did for small businesses, explaining how over time it just *kills* you if you don't adjust prices for inflation. But the same grinding logic applies to landlords too.

http://evergreensmallbusiness.com/please-bump-your-prices-for-inflation/

sbaTexas

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Re: Question on raising rent
« Reply #6 on: January 04, 2017, 05:45:10 AM »
Thank you for your replies!

Gretamom

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Re: Question on raising rent
« Reply #7 on: January 04, 2017, 05:50:33 PM »
It depends - if it's a good tenant we don't increase the rent at all. Rent tends to increase at a less than average rate, but is also less volatile where we live in the Midwest. I also offer a month to month after the lease is up with a stipulation that they can't move out between November 1 - March 1, but only for certain situations (anticipated graduation, unsure of a work situation, etc)
If it is a bad tenant I will increase the rent and be less flexible to hopefully discourage them from resigning & if they do resign at least I get more money for dealing with them! 

maizeman

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Re: Question on raising rent
« Reply #8 on: January 04, 2017, 07:59:18 PM »
If the tenants are very good, I offer them a lease renewal and a small upgrade (e.g. electric windows or whatever).

Okay if I don't ask, this is going to bother me. What are electric windows? I tried googling but only found references to  power windows in cars.

clarkfan1979

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Re: Question on raising rent
« Reply #9 on: January 07, 2017, 03:23:43 PM »
If it's a really good tenant and they are house shopping, I would offer month to month after a year lease. However, I would have the month to month rate higher than a year lease.

Because my two rentals are in college towns, I don't do month to month leases. There are going to be 12 months or 9 months.

Unless there are extreme market conditions, I also wouldn't raise the rent by more than 3% (if you want to keep them). 

However, one year I raised the rent from $1450 to $1950, which was a 35% increase. The new tenants were excited and felt like they got a deal. I mistakenly didn't raise the rent on previous tenants for 3 years and the rent was severely under market value.


SeattleCPA

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Re: Question on raising rent
« Reply #10 on: January 09, 2017, 07:30:40 AM »
However, one year I raised the rent from $1450 to $1950, which was a 35% increase. The new tenants were excited and felt like they got a deal. I mistakenly didn't raise the rent on previous tenants for 3 years and the rent was severely under market value.

I think the above highlights the potential risk of not regularly adjusting the rent for price level changes. If you don't regularly adjust, the problem gets worse and worse... and if you do later want to charge a market rate for the property, the required "catch-up" adjustment becomes larger and larger.


adamcollin

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Re: Question on raising rent
« Reply #11 on: January 09, 2017, 10:24:34 PM »
It depends on the current situation. If you have good and reliable tenants, you can go for the second option.

Berubeland

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Re: Question on raising rent
« Reply #12 on: January 10, 2017, 08:19:41 PM »
The answer to this question depends on where you live and if you have rent control. I am in Toronto, Ontario Canada so I can explain the rules here.

First of all here the lease automatically goes month to month after the first year lease is up.

You must give 90 day notice of rent increase. The tenant has to give 60 day notice before moving out, so if they can't afford the increase, they can give proper notice.

For apartments built before November 1991 we have a prescribed rent increase amount given to us annually by the government, the maximum is 2.5% if the tenant moves out, you can raise the rent as much as you like to a new market rent, but then your annual increases are limited.

You can also make another application and go to the Landlord & Tenant Board to increase the rent 3% per year for a maximum of 3 years (9% total) for capital cost allowances.

For Apartments built after 1991... no limit, except once annually and if you raise it too much your tenant will move out. I'm currently raising rents $100 to $150 per month in some places. It's worse if I don't do it every year, the maintenance fees go up every year for the owners and the rent falls far behind. Then the owner wants to sell or get rid of the tenant or do a huge increase like $350 per month.


Dicey

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Re: Question on raising rent
« Reply #13 on: January 18, 2017, 09:43:34 PM »
Just curious sbaTexas, why you don't want to go month-to-month? I understand the 3% vs. 5%, but is there something more? When our tenants have fulfilled their lease terms (typically two-year, which is common in our area), we know they want to stay, so we have no problem with going month-to-month.

We also tend not to raise rents much on existing tenants that have been good renters. It takes a long time to make up even one month's lost rent. We adjust to market price between tenants.

NeonPegasus

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Re: Question on raising rent
« Reply #14 on: January 19, 2017, 11:16:11 AM »
The previous owner of my rentals put a likely rent increase schedule in the tenants' contracts so they knew to expect annual increases. His projected annual increases were $15/mo. Mine are $30/mo and my units are still somewhat under market value.

Prices for everything (including materials for maintenance) go up. Rents do too. I'd rather start with the expectation that they will go up some every year than end up way below market value and have to jack it up. And in turn, I can afford to do more repairs on the rentals and be a better landlord.