Would you raise rent?

[Paul C.]

A tenant who has been renting for about two years is approaching the end of their lease. They have been a good tenant, almost always on time and no unreasonable requests.

They paid 850/month in year 1 and 875/month in year 2. They're asking if rents will be raised in year 3 and saying that they will shop around if so. They also suggested that if rents were reduced back to the original 850/month, they would consider signing a 2-year lease.

I was planning on raising rents to 900/month this year before getting this preemptive inquiry from the tenant. I believe 900/month is an attainable market rent, but would obviously like to minimize turnover since that will be worth far more than the extra 25/month.

I'm considering countering with 875/month if they'll sign 2-years. I don't think they'll be able to find anything cheaper, maybe 25/month at most, but that hardly seems worth the hassle of moving particularly cause they're comfortable in the current property and know we are very responsive whenever they ask for something.

What would you do?

[Jean Bolger]

I would stay at $875, but just for one year. You've got a solid tenant, so it's worth not going through the upheaval of changing, but the two year lease benefits them a lot more than you in this situation. If your market really spikes, you don't want to be stuck at the $875 next year.