Should I Increase the Rent with 2022 Inflation?

[Cheza M.]

Hey Biggerpockets Community,

I have a question for the landlords out there who has rental properties. Did you guys recently increase your rent due to inflation? I'm a new investor who has recently bought a rental property from out of state, located in Maple Heights Ohio that's currently being rented for $1,200 a month. I was wondering do you think it'd be reasonable to increase the rent by $30-$50 per month or is it too high? How do you actually raise it? Do you just tell your property manager that you'd like to increase the rent? 

[Nathan Gesner]

Quote from @Cheza M.:

Hey Biggerpockets Community,

I have a question for the landlords out there who has rental properties. Did you guys recently increase your rent due to inflation? I'm a new investor who has recently bought a rental property from out of state, located in Maple Heights Ohio that's currently being rented for $1,200 a month. I was wondering do you think it'd be reasonable to increase the rent by $30-$50 per month or is it too high? How do you actually raise it? Do you just tell your property manager that you'd like to increase the rent? 

Ask yourself: are you investing to help provide cheap housing for others or to build a future for you and your family?

If market rent is $1,500 a month and you keep rent at $1,200 a month, you are giving away $300 a month or $3,600 a year. Think of it this way: you are giving your tenant a gift of $3,600 a year so they can afford to live in your rental. In 10 years you would give away $36,000. 

I have nothing against charity. I give away more than 10% of my income every year and have for decades. My goal is to earn $300,000 or more annually through investments so I can give $200,000 of it away. But I'm also being wise about my investments to ensure they continue to grow and remain strong, enabling me to be generous with the earnings. If you give all your money away up front to help your current renters (who may not need/deserve your help) then you may never grow wealthy enough to give generously to those truly in need.

I don't let rent get more than 10% below market and that's only for excellent renters. I recommend you determine what market rate is for your property and then base an increase on that. If rent is more than 10% below market, I recommend you end the lease with your current renters and find new renters at market rate. If your current renters are excellent and you want to keep them, I still recommend you get updated evidence of income to ensure they can afford a big increase.

The other question is: should I raise the rent in small increments over time? No. This is likely to cause confusion, create animosity, and the tenant may still eventually reach a point where the home is unaffordable. Jump to market rate (or close to it) as soon as possible.