Rent increase & lease renewal

[Josh Sterling]

With the rising markets, many of our properties are overdue for a rent increase. We normally sign a 12 month lease initially, then let it go month to month. This has worked well for us from a tenant retention standpoint. I believe that if you go to someone each year and ask them to sign a new 12 month lease, you create two problems:

1) You force the tenant to make a decision about staying 12 more months or moving right away. If the tenant was considering moving and they are forced to make a decision, many people will make the decision to move. When the lease simply goes month to month it is easy for the tenants to put off moving for a couple more months, which goes on indefinitely. I have one set of tenants that have been "about to move" for 3 years now.

2) Each year when you show up to sign that lease, you remind the tenant that they have been there for X number of years, paying the greedy landlord rent.

This post isn't meant to be a debate on 12 month leases vs. automatic month to month renewals. My question is:

How do you go about raising the rent when a tenant is on a month to month lease?

Do you have to sign a whole new lease agreement or just send a rent increase letter stating that all other terms will remain the same, with the exception of the rent increase?

If it matters, I am in Michigan.

Any thoughts?

-Josh

[Joe Fairless]

@Josh Sterling I just got done doing this for about 35 residents in a large apt community. I have my mgmt company give them a letter that is structured as follows:

- thanks them for being a resident and says we're grateful to have them

- reminds them of some improvements we've done to the property

- says it's renewal time and we'd like to offer them a month-to-month or discounted 12-month lease

- says we have had to slightly increase their overall rent due to expenses and inflation but reminds them if they sign a 12-month lease the rent will be lower compared to staying month-to-month

- lists out two options (both an increase from previous rent) and, again, shows them the actual $ amt that would be saved when compared to the new month-to-month rent

- says if they believe they have a special circumstance then feel free to call our community manager to discuss (only a handful called)

I did this two months ago to 29 residents and nobody moved out. Fingers crossed these next 30 generates the same result.