I would like to know if you all have “standard practices” for increasing rent or is it more of a case-by-case basis?
Do you hold the rent for excellent tenants even if your tax bill and maintenance increase?
Thanks for your response!
-Leonard
I was wondering the same as well, how exactly do you raise it without irate tenants? I see lots of properties that are advertising as having below market rents, how the hell do you raise them to market price without p***ing everyone off and having them move out? For example there are a few in my area rented out for around $500 or so that could easily command $700+…imagine what the tenants would do if I raised it $200/month. According the the gov’t figures rents have realistically risen that much in the past 5 yrs or so, how do you convince tenants that its not your fault rents have gone up that much?
Here are the figures I am referring to: http://www.huduser.org/datasets/fmr/fmrs/histsummary.odb?inputname=3280.0*Hartford%2C+CT+MSA
I only increase rent 5.00 or $10.00 at a time. No one moves for that amount. Some people raise it an automatic 5%-10% per year. But yes if you raise it $200.00 people will move. The most I raised it in the past was $395.00 raising it to $425.00, still no one moved but everyone threatened. Hope this helps.
Wendy
That makes sense. Thanks Wendy!
When the rents are below market and the area/neighborhood warrants it, you buy the property and say you want it delivered vacant to the seller. Then you get your own tenants in that are willing to pay market. You’re not really going to have much luck raising it to market. Also in most areas once they find out the landlord is going to sell, they’ll start looking around anyway because they’re afraid of the big rent increases unless they’re in a lease.
I agree Henry. Unfortunately, below market rent tenants have to go Bye Bye when you buy. They ususally end up leaving anyway. Which is amusing because they will pay moving expenses plus another 200.00/ month to another landlord instead of 150.00 more to stay in their own home.
My invester friends go up 3% annually.
I can see why some landlords don’t raise rents on low maintenace trouble free tenants. I have some great ones and I just don’t want to worry about replacing them.
I personally handle each case differntly based on the tenant, the maintenance and the number of times they bug me.
Of course, I have been doing this ony two years and I get above market rents so I have a little time for them to catch up.
How do you get above market rents, Jeff?
I have some duplexes in NC that I am interested in and if I could get market rate rents, it would be a VERY attractive deal (not to mention above market)!!! :o
Many people put clauses in there rental agreements stating rents will increase 5-10% per year for each renewal. Plus you can require your tennant to give you 60days notice if they plan on not renewing their lease so it will give you enough time to find a new tennant willing to pay the higher rent increase.
Sometimes you need to explain to your tennant as to why the rent is going up. Many tennants know about bills, most have cars and see how the insurance goes up or expenses. Need to explain to them that apartments go up to. To many tennants think landlords are making $400 or $500 a month off there rent when its just $700 or $800 a month. Let them know what it is costing you. Tell them that even though your only paying me $700 a month, after i factor in mortage, taxes, insurance and other various expenses I am only making about $75 off you (you may want to lie alittle). When you start telling them all the bills associated with an apartment complex there eyes will open alittle and realize that raising rent 10% is whats required to stay in business…
Remember your running a business, and to successfully run the business you need PCF…
…PCF???
PCF means Positive Cash Flow
I’m going to increase rent for my tenant starting March 1st. Do you have any templates on how to notify my tenant on action?
Thnak you in advance!
Don’t know about your state, but in mine, you have to give 30 days notice from the start of the rental period. That means that you need to give notice by the 29th…
The basics are that you send them a notice that you are terminating their residency effective Feb 28th, if they wish to renew, it’s at the higher rent or they can leave.
Everyone needs to learn the rules in their state. I know some states specify the max you can raise rents, while other states are landlord friendlly and do not care how much you raise the rents.
To me, its fair to tell your tennants about 2months before the lease expires, so they can decide if they want to look elsewhere or pay the increase. It will also give them time to way their options in staying. If you live in a large metro area, its easy to find out the comparitive rents and can even let the tennants know that despite the increase, it will still be less than renting elsewhere along with the moving cost and deposits required.
maybe you want to be creative and give your tennants a deal. See how much it cost to transfer home phone, have cable tv reconnected, electric bill reconnected as well…Say it cost $100, and you know to move will cost at least $200 if you have to rent a truck and etc., then maybe you can offer a discount on the 12th month of the new rent or a credit back when the next lease expires… Or give them a credit on the 1st month of the new lease…Remember, its the creative investors that make the most money in this field…so think outside the box…