Rent-Increase Letter Suggestions...

[Bill Zepeda]

Hi All-

I'm about to conduct my first rent increase and I'm looking for suggestions on how to create a letter that is polite, yet accomplishes the task.  The tenants are good people but I want to stay reasonably close to market rent .  Does anyone have similar letter they could share?

Thanks in advance,

Bill

[George P.]

we do it face to face, not via a letter. if i was a renter, a letter would look cheesy and i'll think the landlord has no guts to face me (embarrassed)

think of yourself as a property manager, as if it's not your house. give them the reasons, increase rent.

[Nathan Gesner]

I disagree. First, any changes or notices to your agreement should be in writing and signed by all involved parties. You can talk to them face-to-face but I would still provide them something in writing and have them sign their acknowledgement. Second, you should run your business like a business. You don't have to be mean about it but there is nothing wrong with notifying your tenant of an increase by writing.

I would also argue that the reason so many Landlords have problems is they do everything verbally and face-to-face, which gives the tenant an opportunity to negotiate or manipulate the situation. You can be a business while still treating people kindly and with respect.

Here's my letter, short and sweet.

Re: Rent increase

Dear _______________:

Due to the increased cost of maintenance, taxes, insurance, and other incidentals, we are required to increase your monthly rent. This letter serves as official notice in accordance with your rental agreement.

Current Rent: $00.00

Increase: $00.00

New Rent Rate: $00.00

This increase takes effect the 1st day of February, 2016.

We’ve been happy with you as a tenant and hope you continue to stay with us for a long time. If you have any questions or concerns, please call us at (307) 555-1111.

[Wade Sikkink]

We just keep it simple.  A very short notice that states the rent is going up to such and such an amount effective on such and such a date.  I don't feel obligated to justify it to the tenant.  It's a business and these are the terms for us continuing to do business together.

After a rent increase a couple years ago I ran into one tenant in the hallway.  He asked, "So when are you putting the swimming pool in?"  I gave him a quizzical look and he continued, "I figured we must be getting a pool since the rent went up so much."  Clearly he has no idea how much a pool costs.  Anyway, that was all I heard on the matter and he is still in the building today.

Good luck.

[Jim Shepard]

I'm with Nathan Gesner with the increase. It bothered me at first but now its just business. Think about it for a minute. The county didn't mind raising your taxes did they? Did your insurance stay the same? How many repairs did you have to do this year that cost you money?
My letter is almost the same. Short and sweet. I cringe when I hear people haven't raised the rent for 10 years! They shouldn't be in the business. They won't move over $25 / month.

[Page Huyette]

Curious what most people think is an appropriate increase.  I know it depends on the property, but from what I've heard it seems about 5% increase is standard.  We have some units we acquired that are under market with a mix of new tenants and longer-term (3+ years)  

Rent for long term is $1200 with never an increase, but market is about $1400

Rent for  newer tenants in 2 units is $1350 but market is $1550

Thoughts?  

[Michael Boyer]

I like the approach of Nathan and Wade, and though it is like Landlord classic rock, I still like some of Leigh Robinson's forms from the old Landlording book (iconic yellow book)... the form is Notice of Change in Terms of Tenancy (Rent) and is very "just the facts"....To paraphrase: Effective (blank date), your rent will be increased by (blank) per month to (new total) per month.. and some more language. 

On the amount of increases, I look at the market, but 5% seldom shocks anyone into packing up right away (but look at market, as they will be too). I especially like increases at turn overs and renewals....Best of luck...

[Jeff B.]

Originally posted by @Page Huyette:

Curious what most people think is an appropriate increase.  I know it depends on the property, but from what I've heard it seems about 5% increase is standard.  

In many states, it's not arbitrary but a matter of Civil Code.  In Calif a landlord can only change rents 10% per year OR as a new lease for a move-in.

[Ceril S.]

We have been toying with the idea of writing it into our actual lease language - that rents will be increased by ~X% annually with a 5yr table showing the increases - say ~2% looks like $1200, $1225, $1250, $1275, $1300 - however, we are worried that it will either outpace or under pace market rents.  I believe that commercial leases have increases written into them - why not have residential leases also?

We should be closing on Friday (long story) and inheriting tenants that have under-market rents. Our thought is to offer them a 6 month lease at ~5% increase (and fix all the things that are not up to our standards - leaking faucets, etc) then hopefully review and renew in 6 months with an annual lease with another ~x% increase that will get us closer to market. 

Double check with your local laws about how many days notice is required, etc. 

[Account Closed]

Thank you for the question. It is interesting to read people's perspectives on this. I have been reluctant to increase rent on my good tenants to incentivize them to stay. Most of my rents are at or close to market value so I am afraid some of they would feel they could find something 'better' somewhere else. Legitimate concern or am I off base on that one? 

[Colleen F.]

I just say something along these lines.

Thank you for being a tenant here at .. Our goal is always to provide a nice place to live, at a fair price. Whenever the prospect of raising rent comes up, we take a good look at costs and local rents.... In that light, we have decided it is necessary to raise the rent on your unit, effective date to  $ amount from $amount. This is due to.....increasing cost of xyz, and upgrades since our purchase of the building.. (if applicable) 

Even after this increase, we believe we are still at or below the average market rent for a unit of this type and we hope you agree.  If you do not wish to pay the increased rent you may decide to seek other housing. If you intend to vacate, the original lease agreement states that you have to provide 30 day written notice of your intent to move.

By signing below you acknowledge that you’ve received this notice and agree to the following: 

and then two check boxes with the content below- 

 -consider this my 30 day notice

- I will renew at  $ rate as stated above.

The check box method helps to get earlier notice if they do not intend to renew.

[Kevin Kroll]

We're talking about a rent increase at lease renewal correct?

I don't make things complicated, i provide three options:

1. 1) 12-month renewal at XXXX/month
2. 2) month-to-month at XXXX/month
3. 3) vacate on or before the natural expiration of the existing lease

Just give them the options and let them pick

[Chris G.]

Originally posted by @Jeff B.:

Originally posted by @Page Huyette:

Curious what most people think is an appropriate increase.  I know it depends on the property, but from what I've heard it seems about 5% increase is standard.  

In many states, it's not arbitrary but a matter of Civil Code.  In Calif a landlord can only change rents 10% per year OR as a new lease for a move-in.

 I have never heard or read of this 10% rule in California? 

[John Thedford]

I write a letter. It never hurts to provide a listing of current rental asking prices from the MLS if available. You can also print out propaganda from Zillow that shows rents of X and then charge a little less:) People understand COLA increases. As far as determining how much, I try and keep my rents at or slightly under current market rates. This usually involves an annual raise in the 3-4% range provided I have kept up with the market.

[John Thedford]

p.s.--I have found rentometer.com to be useless in our market. Their market estimates for Cape Coral are insanely low! Rentometer shows average rents of $1057 for an area around one of my houses and actual rents are $1300+. That figure is for rented units, not asking prices. 

[Jeff B.]

Originally posted by @Chris G.:

Originally posted by @Jeff B.:

Originally posted by @Page Huyette:

Curious what most people think is an appropriate increase.  I know it depends on the property, but from what I've heard it seems about 5% increase is standard.  

In many states, it's not arbitrary but a matter of Civil Code.  In Calif a landlord can only change rents 10% per year OR as a new lease for a move-in.

 I have never heard or read of this 10% rule in California? 

It's part of the Calif Fair Housing regs. Really surprised at how many have never see or read either the HUD Fair Housing nor Calif FH requirements. All you need is one discrimination charge or complaint and life will get painful quickly :sigh:

[Phil Earley]

If you have been a great landlord and the unit is a great home,  you will not have any push back on a 5% increase.  A short and sweet notice suggested by @Nathan Genser followed up by a phone call will do the trick.  The cost for a tenant to move from a great landlord and home is significantly higher than the 5% so they will stay and probably say thanks.

If the previous year had some drama at the home the tenant wasn't responsible for such as a flooded basement, leaky roof, rodent infestation, noisy neighbors, etc.... you may get some push back on the increase and the excuse they need to move.  If they do move out, the cost of the rent readiness, vacancy, marketing, etc, is most likely a bigger cost to you.     

[Radhika M.]

@Jeff B. As far as I have read the california rules unless you have rent control you can increase 10% or more. The only catch is you need to give a  60 day or longer notice. If you have rent control then it is based on those rules.

If you have any written documentation in regards to the 10% please provide.

[Adam Bartomeo]

Whether you like it or not, if you want to continue to grow your portfolio, at some point you will be unable to speak to all of your tenants in person.

I have properties that are 8 states away. There's not a hope I will do it in person. I normally speak with the tenants over the phone several months in advance to let them know that there may be a rent increase do to external factors, taxes or insurance increasing. I give them another call 2 months in advance to let them know it is for sure. I then present the contract via email or snail mail. 

Through my years in management I learned that people need time to adjust for change. Some people on here have no clue on how to gain acceptance from people. They say "it's a business and they don't need to know why there's an increase" or they say "I only send letters to be more efficient". People need time to adjust their mind and their pockets. Just because you raise the rent doesn't mean they can afford it. 

I would avoid a letter and make sure that someone is able to make some kind of one on one contact. 

[MarZia RiVera]

As I read through it sounds like many Investors are leaving money on the tenants table. What I mean is your not truly running your investments as profitable as it could and should be. You should be signing a new lease each year while inspecting the property. The lease should indicate a notice renewal period for which the tenant must indicate if they will renew or be responsible for the following month.  At that 60 day notice is your opportunity to present the rent increase with new lease. Decision is made new lease signed, you might also include a new application to review the tenants continued  qualification, income changes, new credit issues etc. If they do not sign new lease you have 45+ days to market and release, your inspections will indicate approximate cost to rent ready less tenant responsible cost of departure unit cleaning and carpet cleaning.   

Communicating with your tenant is important and ultimately should always be placed in writing acknowledged by all parties. You may feel you are saving money by managing your portfolio but if you fear losing a tenant over rent increases you are losing far more than it cost to hire management when you calculate the loss of rent AND the cost of your time to handle the task.  I have just recently turned over long term rentals with out missing a months rent AND increasing the rate above the market setting the new standard rate.  Be the leader rather than follow behind set the market value.  With all that said let's build a portfolio in SW Florida in Cape Coral where i just rented TWO pool homes less than 1300 sq feet includes pool and lawn services for $1595 month after services and management the owners take is 1300.50. 

[Pat L.]

We write it as a new month-to-month rental agreement. Give them 60 days notice & request a signed response within 15 days. If no response we can exercise the 30day notice option.

In fact my daughter just raised one $60/month, with a subsequent increase in the Security Deposit & the tenant decided to stay??? (But my daughter does have a waiting list for the units).

[Kenneth LaVoie]

Here's mine. My over riding theme is to assure them that we really agonize over whether or not to raise rent, and we don't do it very often, compare our prices to the average (assuming they're lower), and remind them how long it's been since we last raised rents. I also take the time to remind "inherited" tenants about our renter's insurance policy and pet policies. 

Dear Jane,

Thank you for being a tenant here at 999 Silver St. Our goal is always to provide nice places to live, at a fair price. Whenever the prospect of raising rent comes up, I take a good hard look at it, to make sure it’s necessary. In that light, I have decided it is necessary to raise the rent on your unit, effective July 1, 2014 to $640 from $615. This is to partly offset the increasing cost of property taxes, insurance, heating oil, maintenance costs, etc. This is also the first increase since 2010 when it went to 615 from 600.

Even after this increase, I believe we are still below the average market rent for a unit of this type. I hope you agree. I’ve seen 2 BR apartments either much smaller or in much worse condition renting for $650-700 very close by. Our 2 BR apartments START now at $640 for any new tenants. In addition, we charge an extra $35 for pets, a $350 entrance fee for each pet, and 1.5 x one month’s rent for security. We are foregoing those minimums for you because you’ve been here so long and we value your continued tenancy. I promise to always keep rent increases as low as possible, striving to keep up only with the rate of inflation and market value.

Renters Insurance

If you do not already have renter’s insurance, I suggest that you give it serious consideration. This protects your personal belongings in case of fire, burst pipes, burglary or other disasters. My property insurance policy does not cover your personal belongings. Also, if it is your negligence that causes a disaster, you could be held liable for any damage to the property of others. A renter’s policy usually provides personal liability coverage. By signing up for this with your auto insurance company, you may be entitled to a 5% discount on your auto insurance. Renter’s insurance is also relatively cheap, often less than $100 per year.

Thanks again for renting from us. I hope to have you under our “roof” for years to come.

[Steve Vaughan]

I send all of mine in Feb, effective April 1.  Tax refunds help soften the blow a little I have found.  My long-term residents have received the same small increase amounts at the same time of year for years.  It has become expected and expectations are important.  

I also raise it $10 or $25 above what I actually seek in the letter, then I include a "5-star loyalty" (or some such) discount memorandum for paying on-time and in-full with no complaints. They feel rewarded for doing what they are suppose to do.  It also guarantees no rent increases for a year as long as current ownership is in place, even if they are m-m.  

When a larger than normal increase is in order to bring them closer to market, I encourage them to attend local town/city council meetings.  'Our property tax and water rates were just drastically increased.  Attend a meeting and let your voice be heard! They are on the 2nd Tuesday of the month at 7:00 at....'   I doubt anyone has gone, but there is some truth to it and I am not so much the bad guy.   They need to know that cost increases due to municipality rate increases are a reality.   

[Jeff B.]

Originally posted by @Radhika M.:

@Jeff B. As far as I have read the california rules unless you have rent control you can increase 10% or more. The only catch is you need to give a  60 day or longer notice. If you have rent control then it is based on those rules.

If you have any written documentation in regards to the 10% please provide.

 Well done Radhika; I was mistaken AND a succinct synopsis is in this pdf

[Franklin Romine]

@Bill Zepeda

Letters are good for almost everything.  

Check out my rent increase letter in the BP fileplace under... LETTERS.

Simple is better...

Frank

[Radhika M.]

@Jeff B. Thanks for getting back with the info. I just wanted to be sure I did not miss a new change in the law :)

I already deal with rent control for certain properties in San Jose where I invest so I try to keep up to date on these issues.