How to Ask Current Tenant Rent Increase

Question

Hello,

I've recently bought a 2B condo near a college in Chicago with the condition of taking over the existing lease contract with the tenants. The tenants are two college students and the lease ends at the end of August. However, the rent they are paying is too low (approximately $500 cheaper than the average in the area, and the previous landlord didn't even collect a security deposit or pet deposit even though they have a pet. The tenants pay on time, and they keep the place neat though. They need one more year to graduate.

1. Is there a magic way to ask rent increase? To me, It seems hard to ask current tenants about rent increases, especially when they are students.

2. Do I need to consider rates near college town lower than the others in general? This is my first property near a college.

3. Any general advice on rental management for college students?

Thank you for your time.

Joe Villeneuve · Answer

You don't "ask them"...you write a letter, typed on your letterhead, that "tells them" of the rent increase.  Check out the city to see if there is a time period needed before you can notify them, and actually increase the rent.  They don't decide what rent they pay...you do.  Actually, the local market does...you just relay the message to the tenants.

Theresa Harris · Answer

Joe is right, you give them notice of the rent increase. check your local laws to see if there is a cap on how much you can increase it.

Will Gaston · Answer

Hey thanks JD!

@JD Martin

@Kathleen Park this thread may be helpful Nearing 1,000 College Students: Here's What I've Learned

JD Martin · Answer

@Will Gaston is a kingpin of student rentals. We used to do a lot of them but last few years mostly families have absorbed the student rentals we had. Advice on management: inspect regularly, don't assume they'll tell you when something is going wrong unless it's the internet, a clogged toilet or the AC/Heat is broken. Try to inspect in some way that doesn't convey an inspection, i.e. just coming in to check the heating system. Then you can see how they are living, not how they want you to think they are living. If they have a cat, is the litter pan empty? If not, the cat will go somewhere else clean and do their business.

I will say you have one advantage in that they are upperclassmen. Those types of students are usually a lot better than freshmen/sophomores. If you can rent to graduate/law/medical students, even better. My preference as far as students is adult master's degree or medical college students. They usually have jobs in addition to school so have no time for foolishness, often are stable with a boy/girlfriend or spouse, and generally keep the place nice and pay on time because they are actual adults, not just legal adults.

Bob Okenwa · Answer

1. You don't ask, you inform. You are the owner. You don't need permissions from you clientele to raise rates

2. I lived in a college town and rates are higher the closer you get to the university/college

3. Higher deposits, annual inspections.

Kar Sun · Answer

My rent is now about $600-700 below the market. In 3 years I have increased the rent 6% total, for my long term tenant, which is 2% per year. The rents have gone up tremendously in the past year. Unfortunately, I am unable to absorb such cost and I will be increasing my rent $450. Even then my tenant will still have a great deal because there is nothing similar for the price in 15 miles radius. If he decides to leave then I will find someone else at the higher rent. I am not too worried.

Eric Bate · Answer

It's not uncommon to not have a security deposit here in Chicago. The city has it's own set of ordinances regarding security deposits, and if you're not familiar with them, it can get you into trouble. I'm not super familiar with this, since I don't own anything in Chicago. But when the apartment building I live in here switched management companies, they refunded our deposits.

John Warren · Answer

@Kathleen Park you can raise rents, but it should be 60 days before the lease expires that you extend an offer to renew. I don't know that I personally would do a $500 rent raise if they are likely to leave in a year, but you can definitely increase the rents closer to market. There are different schools of thought on this, but real estate is a long game and it is also a people business. If you have good tenants who are taking care of the place and not causing problems, I would look to do a percentage based increase or a modest increase (provided you are cash flowing).

At vacancy is typically where I push rents to full market rents. I will go in and do the new paint scheme, upgrade countertops or kitchens, upgrade appliances and look to maximize my rental income.

I am not sure your rental management needs to be specially catered to students in this case. If your place is in an area where you can get non students, then just treat them like any other tenant.

How to Ask Current Tenant Rent Increase

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