Tenant Rent Increase

[Steve Tse]

Hi BP of Boston,

When you consider rent increase, what factors do you base your decision on ? Do you increase the rent by strictly calculating the increases in your insurance, taxes and etc ? or do you try to not go over a certain percentage like 5-6% of your tenant's current rent ?

Thanks

[Chris Grenzig]

Quote from @Steve Tse:

Hi BP of Boston,

When you consider rent increase, what factors do you base your decision on ? Do you increase the rent by strictly calculating the increases in your insurance, taxes and etc ? or do you try to not go over a certain percentage like 5-6% of your tenant's current rent ?

Thanks

 @Steve Tse we're not in Boston but I'll still chime in. In Florida right now, market rents have mostly stayed flat for 1-2 years, and expenses and insurance have gone up. If I tried to base my renewal on expenses only I would increase above market rents and probably lose my current residents because of that. 

Now most times a resident is under market and this isn't an issue, but I'm just illustrating a point. I would always run a rental survey every year and see what the current market rent is and see what your loss to lease is (market rent minus current rent). Then come up with an increase based off of that. Usually, we keep the renewal to a discount to market rent to incentive people to stay and not incur vacancy and turnover costs, but that discount depends on many factors. 

- How good of a tenant are they?

- How much loss to lease is there? If it's 3% then the discount to market might only be 1-3%, if it's 30% then our discount to market might be 10-20%. 

- Are you okay pushing more and having to re-lease the unit, or would you strongly prefer not to have to do that and give up more on cash flow

- What do you personally feel comfortable increasing the rent for? 

- what do your local laws allow, are there any restrictions