How Much Should I Increase Rent?

Question

Hey fellow real estate investors! I'm new here. Nice to meet you all.

I have an SFR in Columbus, GA that rents for $1750.

1. How much is reasonable to increase rent? I was thinking an extra $25

2. Lease is up in June. When should I let tenants know?

3. Does it make sense to offer a 2-year lease at $1750?

I'll be asking my property manager these questions but, it would be nice to get a few other opinions.

Thank you in advance!

Bill B. · Answer

1) Do you really believe rents have only increased 1% YOY? That’s not good.
2) $1,750 for 2 years means you think rents will increase 1% or less over 3 years. (From a year ago until 2 years from now.) if that’s true, it’s long past time to SELL!

3) what’s the smallest increase you would do the work of finding a new place, go look at it, pack up your entire house, take a day or two off work to move everything, transfer all the utilities and mailing addresses< etc etc etc? If you can physically afford $50 or $100/mo more is there ANY chance you’re moving over $50 or $100? anyone that moves over that amount was moving even if you kept the rent the same.
4) the reason you have a PM is shown by your question. This is how people who dont\’t have a PM are paying to PLAY PM. They dont have a clue what rent should be but there are saving 8% per month, even if it costs them 10-15% and they have to do all the work.

You made the right choice and got a PM listen to them. If they suggest less than a $25increase for 1 year or $50 for 2 years, non-renew the lease and sell. If it’s $r0/mo for 1 year or $100/mo for 2 years at least things about selling. That’s less than 3% rent growth. I bet your insurance and taxes went up more than 3%.

Good luck.

Andrew Syrios · Answer

Depends on a lot of factors including:

- Was the property under-rented or at market?

- How is the rental market where you are at? Is there a lot of vacancy? Are rents rising, falling or flat?

- How important is it to you that the tenant renew? Would a vacancy or turnover cost be really inopportune at this time?

- Would you prefer to give the tenant a break and keep the rent relatively similar even if the rents are rising (assuming they are)?

A $25 raise is quite reasonable. $50 would still not be bad and $100 is possibly reasonable. Again, all depending on the above points.

You should send out the renewal letter with the new rent one month before the resident needs to renew, which is probably two months before the lease ends.

Personally, I'm not a big fan of offering two year leases. I never really saw the point.

Nathan Gesner · Answer

1. Your PM should be a market expert and able to answer your questions.

2. Georgia rent rates have increased 4% in the last year, not just 1%.

3. Stick with one-year leases. Renters are not stable enough to know what they'll be doing in two years and most of them will break a multi-year lease.

Study the market so you know what your home is worth, then rent it at that price or very close to it. If you rent below market, you attract below-market renters that will treat your home like it's worth less. Rent one year at a time so you can stay on track with inspections, rent increases, and lease changes.

Glen Wiley · Answer

Look up what comparable properties are renting for today. Your rent increase should bring the current rent in line with the market. Most people will not move due to a $50-100 increase in a $1750 rent.

If your increase is too low then you will fall behind next year even further. Consider what the long term increases will look like if they stay and where the rent will be as a result. You can't increase by $200-250 to catch up without risk of them moving.

Nicholas Mann · Answer

Hey,

This may not answer your question for 2-3 months from now. But my suggestion for you is to have a realtor in your area send you emails of similar rental units nearby. You may get 1-2 listings every week or 2 (maybe less depending on the area) but a year or 2 after looking at those comps you will know what market rent is. Just my thoughts, asking outsiders from all different markets with different experiences wont give you the exact answer you’re looking for.

Best of luck

Theresa Harris · Answer

If you have a PM, they are in the best position to know the answers to your questions.  You hired them to manage the place, so trust them.  How much the rent increase is depends on the market and the amount of notice depends on your area (30-90 days is the usual range).

Roger Sands · Answer

Thanks everyone for the responses! Super insightful!

Ian Walsh · Answer

Check comps that match the condition of yours.

Michael Smythe · Answer

@Roger Sands go to Zillow and look at comparable rentals near your property.

Be sure to look at the pics to see how nice they also are.

John Clark · Answer

What is the market rate of comparable apartments? That’s your new rate.

Let tenants know ASAP.

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