Should I Increase Rent

Question

2 BR / 1.5 Bath 1,100 sq ft renting for $2,750 in Seattle. Current tenants had a six month lease starting Jan 1 and now are month to month. They are in the city from Missouri and will be leaving either in Sept or Dec, they're not sure yet. The tenants have been great. They pay their rent on time every month and ask very little of me.

Rents are increasing so fast in Seattle that $2,750 was just above market rent in Jan but now I could get $3,000 easy for the place. When they went month to month I told them I might raise rent in Sept if they choose to stay. When they leave I will likely list it for $3,200 and see if I can get that.

There is something to be said for keeping good tenants. They are leaving for sure by the end of the year. Do I raise the rent to $3,000 in Sept or just keep it at $2,750 for their last three months.

Account Closed · Answer

If they stay past this fall I would raise it. I have an automatic increase if they choose to go month to month built into the lease. I use this to negotiate a renewal sometimes. In this case I would let it ride a couple months, but build a month to month clause into your lease for next time or if they renew have them sign the new lease. If they don't move out this fall then offer a renewal for 1 year at $3,000, $3,100 for 6 month, or stay month to month for $3,200. These are just examples. You can play with the numbers. I like an increase for month to month convenience.

And before people start arguing about a lease term vs. month-to-month, I have a buy-out built in the lease so I don't mind sticking them to a term and then if they get transferred or whatever during that time it is covered and I make money on it.

Allen Clark · Answer

I decided to keep it where it is. I notified them that rent will stay at $2,750 through to the end of the year and then if they choose to stay into 2016 then we will adjust it. There has been no increase in operating costs. Just rent rising fast in Seattle. I'm sure I can get $3,000 in the New Year and may go for more.

@Kevin Harrison - interestingly, there are so many people moving into Seattle that a start date of Jan 1 is very popular. This is when these tenants moved in and I had lots to choose from.

This is such a great location that it will always rent, the question is how much can I get? Maybe in the new year I will start ridiculously high and then come down as required.

Kevin Harrison · Answer

Be aware that you are going to have a tough time getting slightly above market rents if they move out in Dec, when most people don't want to move anyway. at least in my expierence.

George P. · Answer

I'd increase it now.  they are moving out anyway.  they will not look nor will they find another place for just 3 months

Travis Beehler · Answer

If they are quality tenants, then keep it at $2,750.  You want them to move out happy, because that means less headaches for you.  I normally raise the rent only when absolutely necessary on a good tenant, and I explain my reasons why.  If nothing has changed on my end, and they are a good tenant, I leave them alone.

Account Closed · Answer

That is awesome. Buy more of those ;-)

Jeanie H. · Answer

I would probably do what you did and keep it the same through the end of the year.  Then if they decided to stay, I'd do the increase then and you can use the various price options others mentioned for lease vs. MTM, etc.

Hopefully everything goes well upon move out if they do go.  Good luck!

Jeff B. · Answer

Have your property taxes or operating expenses increased in the past year?   This maybe the statement you can use to raise the rent slightly and explain to them that it is just to cover the increase in expenses and that you are not making any more profit.  Additionally as others have stated start and end the request by thanking them for being great tenants and that you really appreciate having them as tenants.

Additionally I have read somewhere and found it to be true with most tenants that you can raise the rent approx 5 - 8 % a year and most of them will still stay in the unit.

Account Closed · Answer

greedy bastard.   i say do nothing unless they stay past the end of the year.  no headaches does have value.

George Marinov · Answer

I would keep it.

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