large rent increase in non-rent controlled, hot market

[Kim T.]

My rental condo is located in a very competitive market just outside San Francisco. there is a great supply of quality tenants and I never have vacancy time of more than a few days when they need to move. The unit is 1200 sq feet, 3/3 in a four plex.

I have great tenants now for a year lease at $2950, but am concerned the fair market value is closer to 3500. I know they can afford the increase, and it is legal to raise it by this much at lease renewal, given 60 days notice.  My concern is that it feels unreasonable, almost like a "bait and switch", But I don't want to sustain a rental loss either.

Since I can easily find new tenants, and will have little vacant time, is raising it and letting them move if necessary a better tactic than doing a partial increase as consideration fir them as good tenants?

I am looking for feedback from those who have faced similar dilemmas

[Radhika M.]

@Kim T. I am in the bay area and know the market here for rentals is great and rents have been going up a lot over the last few years.

You are lucky that you do not have rent control and can increase what you feel like. I personally am okay with getting about 5% less rent as long as the tenants are good and low maintenance. 

You are talking about 18% increase here.  So may be you can have open conversation with the tenant and explain to them what the current rates are with examples and tell them that since they are good tenants you will go a little less than market by 100 or 200 dollars. I would increase to 3300.

Another approach you can take is tell then you will do 6 months lease with 3250 and then increase the rent to 3500 after 6 months.

Even if you can get new tenants soon you still may have to small repairs and paint touchups and stuff when the current tenants move out.

Again this is just my 2Cents.