Author Topic: Rent Increase or Not?  (Read 1262 times)

rulesofacquisition

  • Stubble
  • **
  • Posts: 122
Rent Increase or Not?
« on: November 24, 2020, 12:11:06 PM »
I have a duplex that has tenants on both sides getting ready to renew in March 2021, they moved in in March 2019. The 1 bedroom rents for $750 and the 2 bedroom for $895. A look at area rents may have me about $100 under market on both sides, however, the house is from the 1940's and most of the comps are new/newer.

The seller included lawn care so I kept that the same. This summer my husband worked most weekends so I cut the grass. It's too much for me, I'm not young and I have eye surface issues that make dust painful, so I hired a licensed and insured lawn service for the duplex and my personal house. The duplex cost is about $720 a year. My husband wants to up the rent. I'm not sure what to do. 1) Raise rent on great tenants during a pandemic 2) Stop including lawn service (could create issues between tenants since it's a duplex, yard all on one side) 3) Just eat the cost. Wait and raise the rent on new tenants (not sure how long current tenants are staying). Will also not be using a property manager for next tenants.

ericrugiero

  • Pencil Stache
  • ****
  • Posts: 613
Re: Rent Increase or Not?
« Reply #1 on: November 24, 2020, 12:43:16 PM »
Do you know if Covid has affected the tenants?   It seems like most people are either drastically affected or really not impacted financially.  Don't raise the rent if it has hurt their finances.  If you know it hasn't, the pandemic wouldn't stop me.

That said, I wouldn't automatically raise rents just because you decided to hire out mowing the grass.  You were spending time before, now you spend money.  Having a rental that is much older and outdated compared to the competition and charging the same price probably isn't where you want to be.  I'd at least keep it $50/month cheaper.  Raising the rent $50 per side would be $1200/year which more than covers the mowing.  Is that worth the slight chance that somebody will decide to move out due to increased rent?  That's up to you. 

Rubic

  • Handlebar Stache
  • *****
  • Posts: 1102
Re: Rent Increase or Not?
« Reply #2 on: November 24, 2020, 03:00:25 PM »
If you bump up each of your tenants by $30/month at the renewal, that covers your annual lawn service costs.  I doubt if anyone who's satisfied with their current accommodations will move due to a 4% increase in their rent.
 

cchrissyy

  • Pencil Stache
  • ****
  • Posts: 888
  • Location: SF Bay Area
Re: Rent Increase or Not?
« Reply #3 on: November 24, 2020, 06:21:24 PM »
i would do a small increase because tenants are usually expecting that and because if you don't raise it gradually then over time you get too far from market price.

the lawn service wouldn't have anything to do with my decision and i agree that it's better for you to handle it, don't pass along anything about that job to the tenants.

rae09

  • 5 O'Clock Shadow
  • *
  • Posts: 57
Re: Rent Increase or Not?
« Reply #4 on: November 24, 2020, 07:26:42 PM »
We increase it every year. We were renters before and once we stayed in a triplex for 4 years. The landlord didn't increase rent for 3 years and all of a sudden wanted $150 more. I understood his reason but that didn't make it easier for us to digest. We moved out because of this. Had he increased the rent slowly every year, I think we would've stayed longer.

SndcxxJ

  • Stubble
  • **
  • Posts: 107
Re: Rent Increase or Not?
« Reply #5 on: November 24, 2020, 09:30:35 PM »
I am also in the camp of a small increase to help cover costs, but don't forego the increase completely.  Anything in the 4-5% range isn't going to rock the boat unless the tenant was unhappy anyway.
I would keep the professional landscapers because a resident will not keep it up as well as a professional and the place will be closer to rent ready when you do get a vacancy.

Omy

  • Pencil Stache
  • ****
  • Posts: 751
Re: Rent Increase or Not?
« Reply #6 on: November 25, 2020, 01:23:55 PM »
How challenging is it to get great tenants in your area during a pandemic? My plan is to keep my current great tenants happy by not increasing rent. I don't want to annoy them or chase them off.

SunnyDays

  • Handlebar Stache
  • *****
  • Posts: 1745
Re: Rent Increase or Not?
« Reply #7 on: November 25, 2020, 05:43:25 PM »
Does your area not have a landlord tenant act that sets limits on rent increases?  If you arenít bound by any laws, I would still raise it a small amount (2 to 3 %) is common here, just to avoid a shock after a few years.

PMJL34

  • Stubble
  • **
  • Posts: 210
Re: Rent Increase or Not?
« Reply #8 on: November 25, 2020, 10:04:21 PM »
My vote is not to increase rent. I don't see the justification.

Bloop Bloop Reloaded

  • Pencil Stache
  • ****
  • Posts: 568
  • Location: Australia
Re: Rent Increase or Not?
« Reply #9 on: November 26, 2020, 04:47:48 AM »
Always raise the rent to market price. If it's already at market price, keep it. If your tenant is amazing, incorporate a small loyalty discount.

Don't worry about your tenants, mate. They're well looked after by all the pro-tenant laws. In my jurisdiction tenants got rent freezes, eviction freezes, and all sorts of concessions. Not just poor tenants, not just tenants in financial strife, all tenants. You better believe then that as landlords we need to band together and get the market rate back up to market rate.

Not saying you should be vindictive - that's never a good practice. But be fair. Put it at market rate.

PMJL34

  • Stubble
  • **
  • Posts: 210
Re: Rent Increase or Not?
« Reply #10 on: November 26, 2020, 11:35:31 AM »
Bloop,

I generally agree with your approach, but this is a pandemic. You act like the tenants had any say in the rent freezes. Sounds like the government made that decision, not them. I admit, I am in US so maybe things are different in AUS.

Assuming the tenants are good. Isn't that what we all want? (EDIT) They bought the place with a lease in place that covers lawncare. Now they don't want to do it so they want to raise the rent on the tenants? I don't see that as just. Also, raising rent by $50 most likely won't make a dent in the owner's bottom line and could piss off perfectly good tenants. Not worth the risk for me, especially in 2020.

EDIT: I'm not even seeing how their rental is under market. The comps are all new or newer. The owner's is 1940. Without more details, it sounds like it is fair market value.
 

« Last Edit: November 26, 2020, 11:41:19 AM by lilbenny34 »

Bloop Bloop Reloaded

  • Pencil Stache
  • ****
  • Posts: 568
  • Location: Australia
Re: Rent Increase or Not?
« Reply #11 on: November 26, 2020, 01:57:49 PM »
My point is that the only consideration is what is fair market price and should tenants get a loyalty discount for being amazing tenants (if they are). Other considerations like the pandemic aren't relevant except insofar that the pandemic might temporarily alter fair market price based on economic and stimulus factors, but that's unique to each jurisdiction.

Cassie

  • Walrus Stache
  • *******
  • Posts: 6853
Re: Rent Increase or Not?
« Reply #12 on: November 26, 2020, 05:22:42 PM »
When we had a rental if the tenants were good we didnít raise the rent. Bad ones cost you a lot of money.

Omy

  • Pencil Stache
  • ****
  • Posts: 751
Re: Rent Increase or Not?
« Reply #13 on: November 27, 2020, 07:28:14 AM »
It also costs me a lot of money every time I switch tenants. Cleaning, painting, vacancy, and advertising all add up. I don't want to give good tenants any reason to think about leaving. I adjust the rent between tenants, if necessary. If the tenant is a pain in the butt, they will see a 3% raise every year until they move out.

Bloop Bloop Reloaded

  • Pencil Stache
  • ****
  • Posts: 568
  • Location: Australia
Re: Rent Increase or Not?
« Reply #14 on: November 27, 2020, 06:16:26 PM »
It also costs me a lot of money every time I switch tenants. Cleaning, painting, vacancy, and advertising all add up. I don't want to give good tenants any reason to think about leaving. I adjust the rent between tenants, if necessary. If the tenant is a pain in the butt, they will see a 3% raise every year until they move out.

My current tenant is an asshole. I wanted to increase rent, but my state laws don't allow me to increase rent during a pandemic. I wanted to let the lease (fixed term) lapse, but state laws require me to allow the lease to extend if the tenant wants it. So now I'm in a situation where I have a shitty tenant, who I can't kick out, or increase rent on, or change lease terms for any reason, or even just let a lease naturally expire, but he has the right to turn around and say to me "I'm done with this lease" at any time.

How fucked is Australia?

Omy

  • Pencil Stache
  • ****
  • Posts: 751
Re: Rent Increase or Not?
« Reply #15 on: November 27, 2020, 09:09:23 PM »
I'm in the US in an area that has very similar rules. The laws are very pro-tenant in general and the pandemic has made it even more so. I'm extremely fortunate (knock on wood) to have good tenants in both rental properties. I might be able to eek out another 2%, but I risk chasing off good tenants and replacing them with bad tenants...which becomes financially and emotionally expensive.

PMJL34

  • Stubble
  • **
  • Posts: 210
Re: Rent Increase or Not?
« Reply #16 on: November 27, 2020, 09:48:09 PM »
bloop,

a lot of the US is in the same boat. we'll get through it. don't forget, your asshole tenants are at least paying their rent :)

It could be a thousand times worse.

rulesofacquisition

  • Stubble
  • **
  • Posts: 122
Re: Rent Increase or Not?
« Reply #17 on: November 30, 2020, 12:37:39 PM »
Well I found out the tenant in the 2 bedroom side bought a house and would like to leave 1/31, a month early. I'm thinking that's fine, I can dig more to decide if I'm at market rent and now is my chance to not use the property manager. I believe cozy has merged with apartments.com, need to check that out .

PGSD

  • 5 O'Clock Shadow
  • *
  • Posts: 25
Re: Rent Increase or Not?
« Reply #18 on: November 30, 2020, 03:18:51 PM »
If you have a lease, your tenant is responsible for the rent until the end of the lease. If he/she wants out a month early, you can agree to try and find someone to rent it starting 2/1 but, they're responsible for the rent until the new person moves in or the lease is up (whichever comes first). I believe in working with my tenants and being as flexible as possible but, an agreement is an agreement. Good luck.   

As far as rental increases, I do them every year and try to keep them small rather than a big increase every few years or, gasp, no increase at all (assuming area comps support an increase). The tenants expect it so, it should be no surprise.
« Last Edit: November 30, 2020, 03:22:05 PM by PGSD »