Lease renewal and rent increase by 5.5%

[Pal Sa]

Bigger Pockets forum, 

Happy Thanksgiving to you all.  My rental home is coming up for lease renewal. Our tenants would have stayed there for a year by then. They have been good. They pay rent on time. I am able to work with them on maintenance requests and other issues. I would like to offer them a lease renewal opportunity. I am interested to have them continue as well. 

I am thinking of increasing the rent by 5.5%. I am in San Francisco Bay area. I looked at the comps now. Similar ones are asking for a minimum of 10% or more than the current rent I am charging. Charging 10% more will actually put me in a cash flow-positive situation but I am wondering if they think it is a steep increase. I can take one step increase at a time. 

What do you think about a 5.5% increase?

[Greg M.]

Is your unit under rent control? If it is, you're limited to a 2.3% increase this year if you are licensed and 0% if you're not licensed. 

If not, a 5.5% increase, which you say is still under market, seems very fair. However, one thing I'd be very concerned with is being under market in SF with their anti-landlord attitudes. The way they operate, you may never get to market rent again. May want to consider 8% as that is about the rate of inflation. Still slightly below market so they probably wouldn't leave, especially with the added moving costs.