Raising Rent in a market without comps

[Galen Ikonomov]

Good Morning/Afternoon BiggersPockets community,

It is the time of the year for me to raise the rent on my property, however I am bumping into some issues that I would need some recommendations/suggestions how to approach it. 

I live in an area where the SFRs rentals are quite rare ( 2000 population ), but the demand for one from future tenants is insane, because it is a tourist town, therefore there are not many similar comps to my property or if any, the property I am comparing it to is not in the best condition.

 -The First approach I was contemplating is show them what the rents are going for around town,  (e.g) 3 bedroom/2 bath apartment was going for $1400 with washer and dryer but without a garage, back yard or patio OR a brand new apartment complex 3b/2b are going for $2000+ with heated garage, exercising facilities, conference rooms, etc.

My SFR rental is currently renting for $1500 and it is 4b/2b, 2 story house with almost 1 acre of a lot, wooden deck and 2 garages with room for 3+ cars and the basement is used for a storage unit. I have recently replaced washer/ dryer and done minor cosmetics improvements. The tenant base in this town is B - to C.

-The Second approach was to include the rental increase statistics in the United States in addition to the first approach. 

I know that I can raise the rent on this property, because at the time we were marketing it for rent in the 1st hour we have received about 20 inquiries and it got even better later on with more.

There is a huge demand for that kind of property to be a rental, however from all these approaches I don't think it is fair to the tenant, because the Comps I am giving them are not similar to the property and also I don't think I can use the rental statistics around the country simply because I can't compare Phoenix, AZ rental market to the market here.

FYI, I have gone to most of the websites that are providing rental information such as rentometer.com and when I type the address of the property, there is not enough data. Also, I am familiar with the whole neighborhood and know which houses are for rent. Some might say, have you reached out to realtors to ask for help? YES. Realtors here are only working with the typical family who is not investing and are not really investor friendly.

Looking forward for suggestions!

Thank you for your time!
 
 

 

[Bob Okenwa]

@Galen Ikonomov

Don't overthink it. No need to provide research papers to tenants explaining how you run your business. At no point in my life has the gas station ever explained to me why gas is up 20 cents in one day. I'm sure it'd be something like this if they did explain it: "Sorry Mr. Okenwa, but due to external economic factors including civil unrest in Eastern European countries and the market dynamics of oil extraction and shipping expenses, we need to raise the price of gas by a factor that allows us to remain competitive and offset an increased cost of logistics and labor." I'd promptly take that piece of paper and throw it away. I'm sure your tenants don't want to hear about market forces in other parts of America either.

Typical rent increases average out to about 3%. We've seen some places go up ~10% or more the last year or two. Inflation is at 7%. If you feel the need to justify a price increase to your tenant, simply state your costs have gone up X% (property tax, insurance) and the rent has been increased to offset this increase you are occurring. 

Nobody wants their rent raised, but most expect it to happen each year. Run your business as you see fit, but if you don't raise rents now, it'll be much harder to raise it to market rates with that tenant later.