Quick Tip For Increasing Rents For Your Buy and Holds!

[Kyle Curtin]

Hi everyone!,

             I just wanted to make a quick post to help out investors when it comes to raising rents in your buy and hold properties!

Something to keep in mind when leases/TAW agreements are soon to end and you are intending to renew them is the value of the relationship with your tenants and the consistency of payments vs increased rent amounts. Us investors certainly need to gradually raise rents to be on par with always increasing market rents. 

If your tenants are consistently paying you on time and in full, this also holds a special value that should never be taken for granted. This is an extremely sustainable & ideal situation, but what happens when their rents are under fair market value and lease renewals are coming up? Put yourself in their shoes, if the rents are significantly below market value, how would you feel about a $300/ a month increase at once to put it up closer to market value? 

I have definitely heard stories of that being done and resulting in success, but in my opinion the risk factor is very high, and gambling on a potentially very sour situation with a "previously content but quickly turned unhappy" tenant, especially in Massachusetts, being such a tenant friendly state. In my opinion at my current experience level, I am bullish on rent increases being strategically and slowly applied on an individual case by case basis unless you are turning a unit over before getting a completely new tenant. I will stress that I personally have not been able to alter rents on my tenants yet, I purchased my first 3 family househack in December of 2021 and have inherited both of my tenants and their leases until October of '22. My tenants have been absolutely phenomenal and typically pay in full a few days early on the Apartments.com system that I set up. I do everything I can to make sure they are well taken care of and have been blessed. One of their rents is about $200 shy of market value and the other is about $100 over FMR as of April '22. I would love to get these rents up to market rent as soon as possible as much as anyone else, and also very much value the consistency and am aware of the risk factor associated and the proper balance required to make a sustainable decision. I am unsure what I am going to do when October comes.

I think the dynamic between consistency and revenue and the risk associated with both is very interesting and can potentially play a significant role in your success as an investor. How do you typically handle rent increases and tenant relationships?

Thank you,

Kyle

[Matt Ziegler]

Kyle,

First of all, congrats on getting started on your real estate journey. 
Our approach had been honest, respectful and direct communication in regards to rent increases, and with communication in general. Treat folks like you want to be treated. 

Consistent, reasonable (5%) annual increases should be clearly explained to your tenants well in advance of the lease renewal date. Also be sure you are in compliance with local laws. We have this discussion at about 60 days from renewal date. If they choose to move on, turn the unit and get it to market rates.

We strive to provide an exceptional product at a reasonable rate. When we hit this goal, folks stay, take care of the property, and everyone is happy!

Best of luck, Cheers!