When to raise rent on renters whom are behind

Question

With the economy finally exiting the covid 19 crisis.  This question is popping in my head.  When do i raise rent?

In reviewing the average rentals for my area my rents an on the lower side.  Logically I should increase rent!

However, I have a moral dilemma.  Do I raise the rent for renters whom are behind?  If not while they are behind, when?

Andrew B. · Answer

You shouldn't raise the rent, you should have a conversation with the tenant. Let them know that you have to raise your rent to $XXXX to stay competitive and you plan to do so within the next 6 months or so (whatever your timetable is), and have an honest conversation about whether they want to stay or find something affordable. Then you can both work together on a move-out plan that works for everyone.

Michael Dumler · Answer

@William K. couple of questions to address. Are the tenants on a fixed lease or month-to-month? What are current rents? What can rents be raised to? If the tenants are on a fixed lease, then unfortunately you can't raise rents until their lease expires. If the tenants are month-to-month, and there is a big gap in their current rent vs. market value rent, then maybe take into consideration giving them notice to vacate. Hope this makes sense and helps!

Zachary Inman · Answer

@William K. The first step is to have an honest conversation with your tenants. Figure out where they are coming from, and determine if there is alignment in the living situation moving forward. Then, collaboratively make a plan that's doable for your tenants (increasing rent X amount per month). If they are unable to agree to the new terms, then try your best to peacefully part ways.

This is one of the most difficult parts of being a landlord. There's no easy way to have this conversation. In my opinion, the best way is to truly listen to your tenants and not be callous, and then they will be much more receptive to where you're coming from.

Dave Jensen · Answer

I always shift rents at lease expiration to adjust for changing costs (taxes, insurance, excess maintenance) and to be just about at market.  i give my tenants a heads up 60days before lease expiry to give them time to decide to renew or leave which gives me plenty of time to get a queue of new tenants applications. turn time on turnover for us is about 10 days.  if the tenant is behind on rent, that's different.  send certified notices and follow up relentlessly and see what needs done to get them current.  since it's month to month, tell them now you're raising rent.  they can get current or they have to leave.  sorry.  it's business and if you allow folks to stay and not pay rent, you are losing money every month.

George Azita · Answer

Every business in the world must be run by immoral people with the way inflation has been increasing.

People who feel guilty about increasing rents are in the wrong business, or should have someone running their business for them.

Failing to increase rents for a single-family home only takes some money from your pocket, but failing to increase rents for multi-unit properties causes landlords to have properties with rents below market value and when those landlords sell their properties they tend to lose tens of thousands of dollars because the value for multi-unit properties depends highly on the annual gross income.

We raise rents for every tenant on the same month every year like clockwork because we are running a business and our good hearts, feelings and worries about other people's problems are not factors we take into consideration. I say every day, "we have our own personal and business problems we have to deal with and our tenants don't worry about us and they don't offer to pay more rent when he have a disaster like when a unit is flooded or when the wind blows a section of the roof off". When we evict tenants or terminate their tenancy we still send a rent increase notice to those tenants along with all the other tenants' notices just in case those tenants fail to move, or in case we change our mind and decide to continue to rent to them.

Raise your rents every year like clockwork so rent increases are an expectation and not exceptional.

Theresa Harris · Answer

If they are behind on rent, what makes you think they will pay the higher rent?  Tell them they are struggling to pay the rent as it is, you are not going to renew their lease.

Nick Robinson · Answer

@William K.If they are "renters who are behind" on their rent you should have already evicted them, so this is a non-issue.  You are running a business it is very simple you give them a nice, suitable place to live, and they pay you rent.  If they cannot live up to their end of the agreement, then they need to go.  Cutting deals with tenants and letting them "slide" on rent payments never works out good for anyone.  Trust me once you start letting them skip rent and telling them it's okay, they will be less likely to pay your rent.

For tenants you have that are current on their rent and not causing issues it is up to you how much you raise them.  If the gap like you said is $100/mo I would not raise them the whole $100 that month.  I would make incremental rent increases every year to slowly get them closer to market rent, maybe $25-$50/mo.  Knowing if they stay at the property, you will never get them to market rents, which is fine.  If you have a good tenant, they are worth their weight in gold, and I do not think you should raise them all the way to market every year.  You can do that if you want but you will have a lot more turnover, and you will not make the money that you want to make.  Evictions and turnovers should be avoided if possible but someone not paying their rent needs to be removed.  No one will care when you cannot make your mortgage payment.

William K. · Answer

I agree with you 100%.  I felt this way before I posted the question.  Getting free advise never hurts.

When to raise rent on renters whom are behind

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