Author Topic: Raising Rent - But to What $?  (Read 12085 times)

Malaysia41

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Raising Rent - But to What $?
« on: January 14, 2015, 09:34:05 PM »
We own a home in the states that's rented out at $3300 a month.  The renters have been there for 2.5 years.  Original contract was 2 years.  We extended for 1 year at same rate.  That contract is up in 1/2 a year.  We want to raise rents, and are trying to come up with a # to offer the current renters before we put the place up for rent on various websites.

Current market rate is $4200 (based on Zillow, and learning about the market from neighbors on our last visit). 

Our renters 'manage' the place themselves.  If we had hired a property manager back in 2012 we would have charged $3600.  They get this reduced rate and they're expected to fix toilets, call plumbers, etc.  For major issues they hire the handyman across the street and we pay him.  It's pretty awesome actually. Their effective discount is $300 a month for self-management (8.3% discount). 

Here are some scenarios with various maths for rate hike in Aug 2015:

 $4200 at 8.34% self-management discount =  ~$3850
 $4200 at  10%   self-management discount = ~$3780
If we'd raised rent at 3% per year, then Aug 2015 would be ~$3600
If we'd raised rent at 5% per year, then Aug 2015 would be ~$3800

We are determined to raise the rent, but are willing to sacrifice some rent to retain the current renters.

If you were in this situation, what rate would you offer to the current renters? 
« Last Edit: January 14, 2015, 09:37:06 PM by Malaysia41 »

MrFrugalChicago

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Re: Raising Rent - But to What $?
« Reply #1 on: January 15, 2015, 06:53:45 AM »
What is your total expense on the property?

If you love the tenant AND you are not bleeding money, I would raise rent on the conservative side (maybe 0). Remember best case when they move out is you lose 1 months rent for a new tenant, not impossible you lose 2-3 months rent. So $300 a month raise = $3600, about a months rent. If your cost to re-rent is similar, and you have a 50/50 chance of them moving out, it is more or less a wash (with a wash leaning towards keep the current good tenant). If they really have only a 25% chance of moving out, then yes math points to raise the rent. But how do you know what they really think?

electriceagle

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Re: Raising Rent - But to What $?
« Reply #2 on: January 15, 2015, 07:06:30 AM »
Depending on the "rental culture" near your property, tenants may or may not feel personally offended at a large rent increase.

If they feel offended, they could respond by going elsewhere, or by being less careful/less frugal with the management of your property.

Its too late now, but avoiding the shock of a large increase is part of the reason that so many property management companies do automatic small (~3%) increases every year. Nobody is going to get bent out of shape over 3%, but it adds up over time.

MrFrugalChicago

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Re: Raising Rent - But to What $?
« Reply #3 on: January 15, 2015, 07:13:31 AM »
Depending on the "rental culture" near your property, tenants may or may not feel personally offended at a large rent increase.

If they feel offended, they could respond by going elsewhere, or by being less careful/less frugal with the management of your property.

Its too late now, but avoiding the shock of a large increase is part of the reason that so many property management companies do automatic small (~3%) increases every year. Nobody is going to get bent out of shape over 3%, but it adds up over time.

Flip to this is savvy tenants.

I knew it cost them more than 3% to re-rent my apartment. So each year when I got a 3% raise, I called in and said "I will keep my current rent. If you raise it $1 I will move out". Knowing that my staying was worth more than 3%, they gave in and let me stay at the same price.

Obviously not all tenants do this, but I can't be the only one.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #4 on: January 15, 2015, 03:04:05 PM »
What is your total expense on the property?

If you love the tenant AND you are not bleeding money, I would raise rent on the conservative side (maybe 0). Remember best case when they move out is you lose 1 months rent for a new tenant, not impossible you lose 2-3 months rent. So $300 a month raise = $3600, about a months rent. If your cost to re-rent is similar, and you have a 50/50 chance of them moving out, it is more or less a wash (with a wash leaning towards keep the current good tenant). If they really have only a 25% chance of moving out, then yes math points to raise the rent. But how do you know what they really think?

This was exactly our thinking when we extended their 2 year lease for another year.  :)

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #5 on: January 15, 2015, 03:07:16 PM »
Depending on the "rental culture" near your property, tenants may or may not feel personally offended at a large rent increase.

If they feel offended, they could respond by going elsewhere, or by being less careful/less frugal with the management of your property.

Its too late now, but avoiding the shock of a large increase is part of the reason that so many property management companies do automatic small (~3%) increases every year. Nobody is going to get bent out of shape over 3%, but it adds up over time.

I'd say the rental culture there is, "holy shit - how are you renting that house for so little?"  Comparable houses are renting for much more.  I get the feeling that the renters want to do every thing right in order to keep us happy.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #6 on: January 15, 2015, 03:20:36 PM »
Alright, you have me coming down from considering a 10% increase.  However, it is renting well below market, so it's gotta be above 0%.

+ 3% = $3400/ mo ($100/mo increase)
+ 5% = $3470/ mo ($170/mo increase)

$70 a month doesn't seem like a lot but over a year that is $840.  Not insignificant. 

As for our costs, we are net worth positive / cash flow negative with the current arrangement.  With a 15 year mortgage, our PITI is $3850. 11 years is left on the note. A monthly pre-payment of $100 shaves 5 months off the loan duration. A monthly pre-payment of $170 takes 8 months off the mortgage. Not that pre-payment is what we'll do - at these low rates I'd rather put $ in the market - but ... it gives an idea of the impact of $70 over time.

At this point we're talking mouse nuts.  I think I'll just keep it simple and increase by $150.  That starts the precedent of rent increases, and gives us an amount that is a touch closer to market rates than a 3% raise.

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Re: Raising Rent - But to What $?
« Reply #7 on: January 18, 2015, 01:51:51 PM »
Alright, you have me coming down from considering a 10% increase.  However, it is renting well below market, so it's gotta be above 0%.

+ 3% = $3400/ mo ($100/mo increase)
+ 5% = $3470/ mo ($170/mo increase)

$70 a month doesn't seem like a lot but over a year that is $840.  Not insignificant. 

As for our costs, we are net worth positive / cash flow negative with the current arrangement.  With a 15 year mortgage, our PITI is $3850. 11 years is left on the note. A monthly pre-payment of $100 shaves 5 months off the loan duration. A monthly pre-payment of $170 takes 8 months off the mortgage. Not that pre-payment is what we'll do - at these low rates I'd rather put $ in the market - but ... it gives an idea of the impact of $70 over time.

At this point we're talking mouse nuts.  I think I'll just keep it simple and increase by $150.  That starts the precedent of rent increases, and gives us an amount that is a touch closer to market rates than a 3% raise.

From your recent posts, if I'm not mistaken, your rental home is in the Seattle area? I'll assume so for the following:

Seattle is growing at a phenomenal rate. 86k+ new residents in the last year with only 25k or so new units of accommodation. Past generations are selling their rentals to new investors and rents are being raised across the board. Many times 25% or more, quite often 35%+, and sometimes as much as 100% in areas (extreme example, but has happened).

A friend of mine (retired) relies solely on his rental income as his passive income in retirement. For this reason he has kept his rents very stable/low over the past 20 years. His tenants love him, and they take care of him in turn. Thus his rents are about 10-15% lower than the current market.

This seems similar to your case, but the your rental rate disparity is even greater and is at 21% given the $4200/mo rate.

Not being in your shoes, I have no position to advise you as I don't know your risk profile. But I wouldn't hesitate to move the rent up by at LEAST 7.5% or about $250, and I would consider 10% or about $300ish.

Your rent would still be 7200/yr shy of market rates, your tenants MUST realize the value of their rates.

Why not discuss it with them and get the feeling for where they stand?

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Re: Raising Rent - But to What $?
« Reply #8 on: January 18, 2015, 02:11:10 PM »
I would just level with them and tell them that in the current market you can't afford to continue cash flow negative. Tell them you need to get the net rent up to $3850.   Since you messed up by not raising it every year, you could be nice and tell them you will do it over two years.  $3500 first year, $3850 second year.  Thereafter raise it every year if the market is going up.  Have a look on rentometer.com as well.  Also, check craigslist for asking prices in your area.   You will see some high prices but I suspect anyone asking over median price starts dealing with headaches from renters moving in and out.  Remember every new renter brings potential for that rare nightmare tenant who makes your life a living hell.

lhamo

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Re: Raising Rent - But to What $?
« Reply #9 on: January 18, 2015, 03:02:29 PM »
I agree that you should raise it to at least be covering your costs.  Maybe not tell them what they are (because then in the future if you raise it again they might feel like you are being "greedy".

Three years with no rent increase in a rising market with tight inventory and $600/month below current market rates is a steal.  If they move it is either because they are crazy or they have been saving that $600/month (and then some) so that they can buy their own place.

I'd probably start with offering a new 2-year lease at $3650 this year and an even $4000 next year.  With the understanding that as long as the market continues to be strong in your area you will likely be increasing the rent with every lease renewal.


Malaysia41

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Re: Raising Rent - But to What $?
« Reply #10 on: January 18, 2015, 07:36:56 PM »
Our house is in Silicon Valley actually, not Seattle. But with the crazy high tech jobs there (high in number and salary levels) - I think the rental market has a similar dynamic to Seattle in that it has gone up considerably in the last few years.  Our renters have such a high-tech job.  I know they are saving for a house - they've told me as much - but wow - home prices have gone up to staggering levels in the last year alone in our neighborhood.

Our friends just bought a house a few streets over.  It's falling apart.  They had to offer $150k over asking price to buy a 3 bedroom 3 bathroom house with a decrepit pool.  Total sale price?  $1.35M.  Holy shit! 

Rentometer (thanks for the reference SnackDog) says average is $3500 and median is $3800 for 4 bedroom houses in the area.   So maybe my $4200 estimate is high - but rentometer max is $5450, and knowing what other rentals are going for, I think it's dead on.

So, based on your wisdom, and rentometer results, perhaps $3500 1st year, and $3800 the next year is reasonable.  I don't mind being a few hundred a month cash flow negative as $2k+ of mortgage principle goes away with each payment.  Am I just being a sucka?  Or prudent?  IDK, they're good renters, I think I'm being prudent.   

I'm planning to be straightforward with our renters. Something like:   "This August we are increasing the rent to be more in line with market rates.   Before listing the house for $4000 per month, we'd like you to consider the option to continue the contract for another year at $3500.  Please take a month to think about it, and then let us know by (date) whether you'd like to continue for one more year. 



lhamo

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Re: Raising Rent - But to What $?
« Reply #11 on: January 18, 2015, 09:40:58 PM »
I think your message is awesome!  Lets them know you understand the market, and are continuing to give them a deal and the option to continue.

clarkfan1979

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Re: Raising Rent - But to What $?
« Reply #12 on: January 26, 2015, 05:47:05 AM »
I think your message is awesome!  Lets them know you understand the market, and are continuing to give them a deal and the option to continue.

+1

Fishingmn

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Re: Raising Rent - But to What $?
« Reply #13 on: January 26, 2015, 06:27:05 AM »
What is your total expense on the property?

If you love the tenant AND you are not bleeding money, I would raise rent on the conservative side (maybe 0). Remember best case when they move out is you lose 1 months rent for a new tenant, not impossible you lose 2-3 months rent. So $300 a month raise = $3600, about a months rent. If your cost to re-rent is similar, and you have a 50/50 chance of them moving out, it is more or less a wash (with a wash leaning towards keep the current good tenant). If they really have only a 25% chance of moving out, then yes math points to raise the rent. But how do you know what they really think?

Don't agree with this - I rarely have any vacancy even when there's turnover (11 rental properties).

I like your letter. I personally like to include links to other similar properties that are available to show them concrete examples of comparable properties and what they rent for so you can easily justify a rent that's slightly below market.

As for the timing - here's mine -

- 60 days before the end of the lease you send them notification about rent increase and ask if they intend to sign a new 12 month lease at the new rate. Don't give them a month to think about it. They should be able to decide within 1 week at most. Use language that says you will start marketing unit soon if they decide against renewing.

- You need to start marketing vacancy 45 days out from when the opening will occur. Make sure to mention that in your letter that should they move out you will need their cooperation to start showing the property soon.

- Ideally you will want to get a new tenant lined up within 30 days of the current tenant's lease end date. This may get tricky if the old tenant leaves the property in a condition that makes getting it ready harder. Make sure to tell them they need to be out by noon on the last day (if that's what lease says) and line up things like carpet cleaning and/or painting and/or cleaner well in advance so you can get those squeezed in before new tenant takes over.

As long as you have strong justification for the raise in rent I wouldn't feel bad about doing it at all. If they move out and you actually rent it for the market rate quickly you may be better off. Just keep open communication and by keeping rent slightly below market you are still treating them very fairly.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #14 on: April 23, 2015, 08:34:08 AM »
So we're nearing the time for me to email tenants about renewing the rent.

I just read this article about the bay area rental market

Rents are up 11.3% in SJ year over year.

rocksinmyhead

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Re: Raising Rent - But to What $?
« Reply #15 on: April 23, 2015, 09:22:59 AM »
I'm planning to be straightforward with our renters. Something like:   "This August we are increasing the rent to be more in line with market rates.   Before listing the house for $4000 per month, we'd like you to consider the option to continue the contract for another year at $3500.  Please take a month to think about it, and then let us know by (date) whether you'd like to continue for one more year.

I'm a tenant and this sounds fair and reasonable to me! (although holy shit I almost threw up in my mouth hearing how high housing costs are out there... that's at least 4x rent in Oklahoma, LOL)

CommonCents

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Re: Raising Rent - But to What $?
« Reply #16 on: April 23, 2015, 09:29:00 AM »
I'm planning to be straightforward with our renters. Something like:   "This August we are increasing the rent to be more in line with market rates.   Before listing the house for $4000 per month, we'd like you to consider the option to continue the contract for another year at $3500.  Please take a month to think about it, and then let us know by (date) whether you'd like to continue for one more year. 

Mention that you held off on rate increases for 2 years. 
Don't give so much time.  Mention when you'll begin marketing at the higher price.
Require a signed contract, not merely an indication of interest.

"After three years of the same rate, this August we are increasing the rent to be more in line with market rates.   Before listing the house for $4000 per month, we'd like to offer you the option to continue the contract for another year at a substantial discount of $3500 because you have been good tenants.  If you would like to accept our offer, please sign the enclosed one year lease by X date.  If not, we appreciate your cooperation as we market and show the property.  " 

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Re: Raising Rent - But to What $?
« Reply #17 on: April 27, 2015, 05:44:31 AM »
Ditto.  The above is straightforward and business like. 

NoNonsenseLandlord

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Re: Raising Rent - But to What $?
« Reply #18 on: May 04, 2015, 06:36:50 AM »
Ask the tenant what you should raise the rent to, and what they would be comfortable paying.  I have done this several times, and each time I get my rent increase.  They might suggest another $100, and that may be enough for you.

Worse case you lose a tenant.  What does it cost to replace them?  Advertising, showings, placement fees, painting, carpet, repairs, etc.  If you have 100 tenants, it's only a 1% revenue reduction.  If you have only 1 tenant, it's 100% reduced revenue.

SnackDog

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Re: Raising Rent - But to What $?
« Reply #19 on: May 04, 2015, 08:11:47 AM »
We were in the same boat last month.  Raised the rent about half way and to market figure, out of kindness, and the tenant decided to move out.  Will miss her but cry all the way to the bank.  Will clean the place up and rent it at market rates.  There are very few homes for rent in our area.  Ours is walkable to BART and top 10 ten school district so fingers crossed we get a good tenant.

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Re: Raising Rent - But to What $?
« Reply #20 on: May 05, 2015, 02:28:50 PM »
Ours is walkable to BART and top 10 ten school district so fingers crossed we get a good tenant.

No need to cross your fingers.  Put the odds in your favor.  Have a solid credit score and income criteria in place, and expect them to be good.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #21 on: May 05, 2015, 09:23:18 PM »
Okay - I sent off the email.  It's very similar to my original text with some edits per y'alls suggestions. Thanks for those. Looking at properties on craigslist and zillow, I'm thinking that if we were to list it today, I'd ask $4200, with the intention of getting talked down to $4k. 

In the email I extended the offer to continue at $3500 per year.  That's an increase of $200.  On one hand I feel that might tip them over toward vacating.  But on the other hand, it's still way below market. 

We'll see what they say.

clarkfan1979

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Re: Raising Rent - But to What $?
« Reply #22 on: May 08, 2015, 08:40:06 AM »
I agree with comments about small rent increases every year. Even if you like your tenants, a small increase is easy to justify (2-3%). Tell them that a 2-3% rent increase is still lower than market value.

I own a rental and came across an article stating that rent went up by 17% in one year. Its a tricky call. 

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Re: Raising Rent - But to What $?
« Reply #23 on: May 10, 2015, 05:52:19 AM »
If you can do an inspection. Or ask them how the paint, appliances, or carpet etc. are looking. If there is an upgrade the property needs then look at doing it and justifying a rent increase. Too many landlords wait for tenants to move out to do upgrades. If the place needs new appliances and you are going to have to replace them when they move out anyways, offer to replace them now (it helps if they mention or say what they would like). "I'm glad you mentioned the appliances. I can look at having an new set of appliances installed if you will renew your lease at $XXXX"

Another GREAT way is signing a new lease vs month to month. It sounds like this: "Hey guys, I am looking at some things financially and need to know your plans. If you want to stay month to month I will need to raise the rent to market value of $4,200 a month, but if you will sign a new one year lease we can do $3,850 a month, and if you will sign a 2 year lease we can do $3,700 a month." I've had plenty of tenants sign this way and thanking me the whole time for helping them avoid the mo2mo rate (this should also be in your lease).

The numbers are just an example but in the new lease put an automatic annual increase of an acceptable percentage. Then going forward it is automatic.
 

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #24 on: May 13, 2015, 10:03:13 PM »
I heard back from the tenants.  They just closed on a house and move in a few days after their lease with us is up.  They're asking for an extra 3 weeks over the lease end and then they're out.

So, I think no matter what I would have offered, this would have been the outcome. 

Okay, so now I know this summer we'll be getting new tenants.   2.5 yrs ago, as we prepared to move, our trusted handyman overheard me interviewing property management companies.  He approached me later and recommended a friend of his.  Before I had a chance to call this guy, we ended up renting to friends of friends who offered to manage themselves.  It has worked out well, but now it's time to come up with a new plan.  So I've hit trusted-handyman up for the friend's contact info.  I'm inclined to go with working with a person rather than a management company.  When I interviewed those management companies I got a bad feeling.  For one thing, they tried to tell me the house would rent for $2700.  I knew damned well it could rent for $3600.  In the end we rented 'at a discount' for $3300.   Also, the reps were young, slick ... you know... bullshitty.  Not interested.  That said, I think it may be naive to think we can continue renting directly to tenants when we live on the other side of the earth. 

In the meantime, I've posted on FB that we're looking for tenants, and I'll contact this property manager as soon as I get his info.  There's plenty of time, but there's no time like the present to get to planning.

Our summer plans may need to wait another year. Sigh.

lhamo

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Re: Raising Rent - But to What $?
« Reply #25 on: May 13, 2015, 10:10:35 PM »
Good luck figuring out your management strategy and finding good new tenants.  At least now you should be able to get market rate for the place.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #26 on: May 13, 2015, 10:26:52 PM »
Good luck figuring out your management strategy and finding good new tenants.  At least now you should be able to get market rate for the place.

Yep.  If, after management fees, we can get closer to $3850 that'll be sweet.  Oh it's so hard to not just throw money at the mortgage in order to be closer to being DONE with it. My heart wants to pay it off, my head says "NO!"  My heart will be more convinced once the PITI is fully covered by the rent. 

SUP

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Re: Raising Rent - But to What $?
« Reply #27 on: May 14, 2015, 06:22:16 AM »
I heard back from the tenants.  They just closed on a house and move in a few days after their lease with us is up.  They're asking for an extra 3 weeks over the lease end and then they're out.

So, I think no matter what I would have offered, this would have been the outcome. 

Okay, so now I know this summer we'll be getting new tenants.   2.5 yrs ago, as we prepared to move, our trusted handyman overheard me interviewing property management companies.  He approached me later and recommended a friend of his.  Before I had a chance to call this guy, we ended up renting to friends of friends who offered to manage themselves.  It has worked out well, but now it's time to come up with a new plan.  So I've hit trusted-handyman up for the friend's contact info.  I'm inclined to go with working with a person rather than a management company.  When I interviewed those management companies I got a bad feeling.  For one thing, they tried to tell me the house would rent for $2700.  I knew damned well it could rent for $3600.  In the end we rented 'at a discount' for $3300.   Also, the reps were young, slick ... you know... bullshitty.  Not interested.  That said, I think it may be naive to think we can continue renting directly to tenants when we live on the other side of the earth. 

In the meantime, I've posted on FB that we're looking for tenants, and I'll contact this property manager as soon as I get his info.  There's plenty of time, but there's no time like the present to get to planning.

Our summer plans may need to wait another year. Sigh.

Take the time to tune up your lease. Build in the annual increase with renewal, a month-to-month fee, and other items to avoid the same problem in 2 years from now. I would shop property managers much more than just a couple. A good one should make you more money and easily cover their fee. Look for an active NARPM member. Review their management agreements and where their fees are. IF you go it alone then spend all your initial resources on SCREENING!!! In case you missed that its SCREENING!!!!! Give me your cell number and I'll call you ever day and yell this at you ;-)

CommonCents

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Re: Raising Rent - But to What $?
« Reply #28 on: May 14, 2015, 07:23:59 AM »
Are you giving them the three days?  If that pushes you on the 4th of a month to start the new lease, that can make it really hard to get someone into the house.  Most people want/need the lease to start on the 1st of the month.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #29 on: May 14, 2015, 07:29:30 AM »
Their lease is up on the 3rd.  I'm thinking of letting them stay til about the 20th, for pro-rated rent of course roughly $100 per day, then I go in for ten days and get things ship shape, ready for renters to move in Sept 1. 

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Re: Raising Rent - But to What $?
« Reply #30 on: May 14, 2015, 09:55:01 AM »
Check your state laws too.  Some states have rules about how much you can raise rent in a given year.

Malaysia41

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Re: Raising Rent - But to What $?
« Reply #31 on: May 14, 2015, 04:04:17 PM »
Check your state laws too.  Some states have rules about how much you can raise rent in a given year.

No limit on rent increases in my area of California.  I could increase rent 2x if I wanted.   Besides - even if rent caps existed they would apply to the current tenant only, not for a new listing, unless I'm totally unaware of some issue with raising rent to new tenants.  That would seem odd.

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Re: Raising Rent - But to What $?
« Reply #32 on: May 14, 2015, 04:56:56 PM »
Take the time to tune up your lease. Build in the annual increase with renewal, a month-to-month fee, and other items to avoid the same problem in 2 years from now. I would shop property managers much more than just a couple. A good one should make you more money and easily cover their fee. Look for an active NARPM member. Review their management agreements and where their fees are. IF you go it alone then spend all your initial resources on SCREENING!!! In case you missed that its SCREENING!!!!! Give me your cell number and I'll call you ever day and yell this at you ;-)

Okay, not 100% on what your advice is here SUP  /sarcasm.

I rooted around the other RE&Landlording threads and found a recommendation for this BiggerPockets Tenant Screening blog entry.  Is this sufficient in your opinion or do you recommend other screening criteria?

Notes from the bigger pockets article:

1. Set Criteria:
Income >3x rent
Good References
Never Evicted
Clean Background (no felonies, etc)
No co-signers (I added this one - I want 1 person on the hook for rent only)

2. Pre-screen
Advertisements include rent rate, location
Phone call - get them talking ask them to ask you about the property, explain the criteria and that I'll run a credit and background and reference check, ask how many people will be living in the house, any pets?

3. Application
Name address phone # DL#, SS# DoB
References - current and past landlords + contact info
Employer incl contact info, job info incl take home pay (incl 2 most recent pay stubs)
How many evictions filed against them or leases they've broken?
Release of information signature
(consider a few other questions in the blog post linked above)

4. Run credit & background checks using SmartMove from transunion. Applicant pays the fee.   If they are denied, I send reason, and name, # and contact info for transunion if that report is the reason for denial.

Whole time: be aware of fair housing laws - deny or accept on basis of criteria and apply criteria to EVERYONE.  Never ask applicant if married, have kids, what race, religion, etc.

Okay this summary isn't everything from that blog - but it's a start mainly for future reference.

Any big ommissions I should add?

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Re: Raising Rent - But to What $?
« Reply #33 on: May 14, 2015, 05:07:38 PM »
Wow - the renter has already drummed up a candidate for us - her cousin lives a street over and needs a 1 year lease while they renovate their house.  Well that's encouraging.  Wow, that seems like a lot of money to spend on rent all while throwing $ at a house renovation.  Well, we'll see where this leads :).

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Re: Raising Rent - But to What $?
« Reply #34 on: May 16, 2015, 05:41:53 AM »
So I'm calling the cousin tomorrow. Discussed it with DH and we decided to offer $3850 per month and will ask for a SmartMove credit check and we'll reimburse the app fee from 1st months rent, should they move in. 

I'm torn whether I should fly out or have a friend go over to handle the key hand-off and inspection to determine damage vs wear n tear on the property.  I feel like I should be there. Anyway - I can figure that out later.  For now I'm going to start by phone interviewing the cousin.

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Re: Raising Rent - But to What $?
« Reply #35 on: May 16, 2015, 08:32:43 AM »
I screen hundreds of tenants every year.  I use credit score and income as my main criteria.  With a 3,850 rent, you better make sure the people can afford it.  And the credit score will be not only a payment indicator, but a behavior indicator.

You should want a 700+ credit score with that kind of rents.

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Re: Raising Rent - But to What $?
« Reply #36 on: May 18, 2015, 03:43:47 AM »
So I'm calling the cousin tomorrow. Discussed it with DH and we decided to offer $3850 per month and will ask for a SmartMove credit check and we'll reimburse the app fee from 1st months rent, should they move in. 

I'm torn whether I should fly out or have a friend go over to handle the key hand-off and inspection to determine damage vs wear n tear on the property.  I feel like I should be there. Anyway - I can figure that out later.  For now I'm going to start by phone interviewing the cousin.

The blog post is solid. Verify income by having them provide paystub and/or bank statements. 3x rent + credit over 700 and no collections and you should be good. On the credit the key is payment history more than score. Avoid late payers etc. Any collections from utilities or landlords is automatic denial.

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Re: Raising Rent - But to What $?
« Reply #37 on: May 18, 2015, 03:47:49 AM »
So I'm calling the cousin tomorrow. Discussed it with DH and we decided to offer $3850 per month and will ask for a SmartMove credit check and we'll reimburse the app fee from 1st months rent, should they move in. 

I'm torn whether I should fly out or have a friend go over to handle the key hand-off and inspection to determine damage vs wear n tear on the property.  I feel like I should be there. Anyway - I can figure that out later.  For now I'm going to start by phone interviewing the cousin.

If you don't want to go there have your friend do a video walkthrough. Most cell phones work fine. Great for documenting condition and easy. Then if you want piece of mind, have a friend do a video inspection every 6 months and send to you. No need to travel these days. We do these for people all the time.

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Re: Raising Rent - But to What $?
« Reply #38 on: May 20, 2015, 12:37:40 AM »
I like the idea of the video walk-through.   In my last email to the applicant, I included that as part of the handover activities in Aug.  Thanks SUP.

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Re: Raising Rent - But to What $?
« Reply #39 on: May 21, 2015, 07:58:29 PM »
So I sent off the lease agreement with a couple additional clauses we discussed on the phone (our expectation for min level of yard maintenance, pets). 

I sent the Transunion SmartMove application as well, paying for it myself.  They completed this app within 24 hours.  Let's just say the income and credit scores are both excellent.  No criminal history.

In the end, we settled on $3700 / mo with them taking responsibility for the yard maintenance.  They didn't negotiate that down, I just felt like, with them self-managing, this was fair.  No need to be greedy. 

Thanks again for all of your advice.  Doing the homework on screening was invaluable.  I'll carry that forward for sure.

I know of an independent property manager who I may hit up to do the video walk through.  I'm going to see if he'll accept a one time fee for meeting with the new and old tenants.  This, it seems to me, would be more prudent than asking a friend to go.  He'll know what to look for and what questions to ask.  Also, he can help me assess if there is any damage that needs to come out of the security deposit. 

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Re: Raising Rent - But to What $?
« Reply #40 on: May 24, 2015, 06:08:26 AM »
I know of an independent property manager who I may hit up to do the video walk through.  I'm going to see if he'll accept a one time fee for meeting with the new and old tenants.  This, it seems to me, would be more prudent than asking a friend to go.  He'll know what to look for and what questions to ask.  Also, he can help me assess if there is any damage that needs to come out of the security deposit.

If the PM wants too much or doesn't get it, an inspector works too. Like the ones performed when purchasing. Should be under $300, but I would negotiate down and let them know you don't need roof, attic, crawl space and all that stuff, just a rental condition. This is nice cause its a third party professional. Pretty rock solid when it comes time for move out. Seems expensive but its much less than a trip to the property, and WAY less than a deposit dispute on the move out.

Good luck!

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Re: Raising Rent - But to What $?
« Reply #41 on: June 13, 2015, 03:08:49 AM »
I know of an independent property manager who I may hit up to do the video walk through.  I'm going to see if he'll accept a one time fee for meeting with the new and old tenants.  This, it seems to me, would be more prudent than asking a friend to go.  He'll know what to look for and what questions to ask.  Also, he can help me assess if there is any damage that needs to come out of the security deposit.

If the PM wants too much or doesn't get it, an inspector works too. Like the ones performed when purchasing. Should be under $300, but I would negotiate down and let them know you don't need roof, attic, crawl space and all that stuff, just a rental condition. This is nice cause its a third party professional. Pretty rock solid when it comes time for move out. Seems expensive but its much less than a trip to the property, and WAY less than a deposit dispute on the move out.

Good luck!

Thanks SUP - I'm going to send in the prop manager guy + a termite inspector.  Just to be sure we are okay there.  It's been over a decade since we've inspected for termites. 

I received the signed lease agreement - they move in Aug 8.   I've sent instructions for paying deposit and rent.  I can't believe this all happened without listing the house.  Amazing. 

I'm excited - 15% increase in rental income from this property.  Wow.  I just referred to what once was our home as 'this property'.  Feels odd.

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Re: Raising Rent - But to What $?
« Reply #42 on: June 13, 2015, 03:35:25 AM »
We're in the same boat, nearly.  Just jumped rent 20% and still feel underpriced.   If we wanted to return and occupy the house I feel the opportunity cost of losing that rent is so high we might be better off living elsewhere.  In other words, we are priced out of our own house!   Friends with homes in San Francisco are in much worse shape in this regard - they would lose a fortune in rent if they re-occupied.

We are flying home using mileage points for a one-week "maintenance turnaround" between renters as we haven't seen the joint since 2008.  New renters are both doctors in their sixties who have rented from our agent before.

Your idea of a video record is good but honestly the broad definition of "normal wear and tear" used in the US makes it pretty difficult to get back anything from renters unless they truly demolish the place.  And in that case, your deposit may not be nearly enough nor will small claims court so most people just write it off.  I've had two friends with nightmare high-end renters - one couple got so fed up they sold the place.  The others had to deal with police and no income for several months.

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Re: Raising Rent - But to What $?
« Reply #43 on: June 13, 2015, 05:23:33 AM »
We're in the same boat, nearly.  Just jumped rent 20% and still feel underpriced.   If we wanted to return and occupy the house I feel the opportunity cost of losing that rent is so high we might be better off living elsewhere.  In other words, we are priced out of our own house!   Friends with homes in San Francisco are in much worse shape in this regard - they would lose a fortune in rent if they re-occupied.

We are flying home using mileage points for a one-week "maintenance turnaround" between renters as we haven't seen the joint since 2008.  New renters are both doctors in their sixties who have rented from our agent before.

Your idea of a video record is good but honestly the broad definition of "normal wear and tear" used in the US makes it pretty difficult to get back anything from renters unless they truly demolish the place.  And in that case, your deposit may not be nearly enough nor will small claims court so most people just write it off.  I've had two friends with nightmare high-end renters - one couple got so fed up they sold the place.  The others had to deal with police and no income for several months.

I figure the video walk-through will simply be a snap-shot in time.  When I walked through the house last summer it looked fine.  I anticipate giving the entire security deposit back unless my agent finds something very obviously damaged by the renters.

Yeah - I'm totally feeling priced out of our own home too.  It's crazy.  Same boat indeed.

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Re: Raising Rent - But to What $?
« Reply #44 on: June 22, 2015, 03:39:01 AM »
We're in the same boat, nearly.  Just jumped rent 20% and still feel underpriced.   If we wanted to return and occupy the house I feel the opportunity cost of losing that rent is so high we might be better off living elsewhere.  In other words, we are priced out of our own house!   Friends with homes in San Francisco are in much worse shape in this regard - they would lose a fortune in rent if they re-occupied.

We are flying home using mileage points for a one-week "maintenance turnaround" between renters as we haven't seen the joint since 2008.  New renters are both doctors in their sixties who have rented from our agent before.

Your idea of a video record is good but honestly the broad definition of "normal wear and tear" used in the US makes it pretty difficult to get back anything from renters unless they truly demolish the place.  And in that case, your deposit may not be nearly enough nor will small claims court so most people just write it off.  I've had two friends with nightmare high-end renters - one couple got so fed up they sold the place.  The others had to deal with police and no income for several months.

Those stories are the minority. And for every one of them I have had to assist with it has been poor management. Either through lack of screening, record keeping, or the use of verbal communication instead of documentation. If you screen like a professional, document the condition, perform inspections, hold a large deposit, then you will recover expenses and damages on the move out.

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Re: Raising Rent - But to What $?
« Reply #45 on: June 22, 2015, 05:21:17 AM »
We're in the same boat, nearly.  Just jumped rent 20% and still feel underpriced.   If we wanted to return and occupy the house I feel the opportunity cost of losing that rent is so high we might be better off living elsewhere.  In other words, we are priced out of our own house!   Friends with homes in San Francisco are in much worse shape in this regard - they would lose a fortune in rent if they re-occupied.

We are flying home using mileage points for a one-week "maintenance turnaround" between renters as we haven't seen the joint since 2008.  New renters are both doctors in their sixties who have rented from our agent before.

Your idea of a video record is good but honestly the broad definition of "normal wear and tear" used in the US makes it pretty difficult to get back anything from renters unless they truly demolish the place.  And in that case, your deposit may not be nearly enough nor will small claims court so most people just write it off.  I've had two friends with nightmare high-end renters - one couple got so fed up they sold the place.  The others had to deal with police and no income for several months.

Those stories are the minority. And for every one of them I have had to assist with it has been poor management. Either through lack of screening, record keeping, or the use of verbal communication instead of documentation. If you screen like a professional, document the condition, perform inspections, hold a large deposit, then you will recover expenses and damages on the move out.

I'm so glad we've got you on our side, SUP! 

We held an extra large deposit - 1.5x one-month's rent - and documented a bit - mainly the hardwood floors.  They have dogs - I worry the floors will be scratched.  That said, I'm not looking to nickel and dime them.

This is also a trial run for that property manager.  If I like the way we work together, we may hire him in a year.  Plus I didn't tell him what we're renting the house for.  I'll be interested to hear what he thinks we should be getting.

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Re: Raising Rent - But to What $?
« Reply #46 on: June 22, 2015, 06:20:19 AM »
Holy cow - dogs!  We are dog lovers and owners and I am comfortable with how we manage pets in the house.  Nobody would guess there is a dog living in our place.  But I am not at all comfortable with how the average dog owner lets the animal behave either indoors or outdoors.  Too many horrors of urine, floors, walls, doors, insurance, etc. We had an offer from a couple with stunning credentials and a dog. Then even included a letter.  I asked the agent - "are we at the stage in this rental and this market where I should consider a dog in the house in order to rent the place?"  Of course, we are not so we tearfully turned them down.   Tough call.

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Re: Raising Rent - But to What $?
« Reply #47 on: June 24, 2015, 12:21:21 AM »
I know of an independent property manager who I may hit up to do the video walk through.  I'm going to see if he'll accept a one time fee for meeting with the new and old tenants.  This, it seems to me, would be more prudent than asking a friend to go.  He'll know what to look for and what questions to ask.  Also, he can help me assess if there is any damage that needs to come out of the security deposit.

If the PM wants too much or doesn't get it, an inspector works too. Like the ones performed when purchasing. Should be under $300, but I would negotiate down and let them know you don't need roof, attic, crawl space and all that stuff, just a rental condition. This is nice cause its a third party professional. Pretty rock solid when it comes time for move out. Seems expensive but its much less than a trip to the property, and WAY less than a deposit dispute on the move out.

Good luck!

Thanks SUP - I'm going to send in the prop manager guy + a termite inspector.  Just to be sure we are okay there.  It's been over a decade since we've inspected for termites. 

I received the signed lease agreement - they move in Aug 8.   I've sent instructions for paying deposit and rent.  I can't believe this all happened without listing the house.  Amazing. 

I'm excited - 15% increase in rental income from this property.  Wow.  I just referred to what once was our home as 'this property'.  Feels odd.

Hi, new to the forum, but I'm local in SV, and very much involved in the rental market (as every tech person is here). You could have just gone for market rate. There is an abundance of cash and even with a referral like you described, if they can afford the payments next to their house renovations, they wil be fine to do market rate as well. You're offering them a huge benefit for being so close to their house.

What you want is a tenant resume including credit score, income etc going forward. I've been asked to share an offer letter before here by a tenant. I'm paying your rate in SF for a 1 bedroom, so it sounds like your place is a steal ;) 

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Re: Raising Rent - But to What $?
« Reply #48 on: June 24, 2015, 01:42:06 AM »
Doh?

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Re: Raising Rent - But to What $?
« Reply #49 on: August 19, 2015, 12:21:56 AM »
The new renters are in, and there's loads of problems.  The heater A/C unit blew out.  Control panel and motor.  It's weird because it's a high end expensive HEPA unit installed in 2006. It shouldn't blow out.  I'm suspicious of the electrical now. 

Also, I was silly and assumed that our previous tenant would point out to new tenant that you must lift to close the front load washer. Predictably, the latch broke.  I'd bought replacement latches before we left - but she says the broken pieces went into the screw hole?  Plus the hinge is cracked so should probably be replaced.  So now I'm thinking - do I just order the latches again?   A new hinge?  Or buy a used washer or new one at home depot? 

And new tenant hasn't heard back from the handyman I hired.  He came in, did work, but now is radio silent.  At least he just took a non-essential pocket door.  But it'd be nice to, I dunno, get the bill, and maybe the door back? 

Hmm.

At least they're paying $500 more per month than previous tenants.  It may still be a bit below market, but it's something.