Rent-Increase Letter Suggestions...

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Rent-Increase Letter Suggestions...

Bill ZepedaPro Member
Rental Property Investor · Brentwood, TN · Member since 2014 · 16 posts · 5 votes

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

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
10y

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.

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  • Steven Gesis
    Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
    10y
    Originally posted by @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

     Hi Bill,

    This is always a difficult subject to bring up to tenants. No one ever wants their rent to go up, that just doesn't make sense! Many times they don't understand why it has to change if the house is still the same. Some suggestions is to do it by meeting with them in person, but sometimes you might not have to the time to do that. One of the best ways to do it is to submit a letter with their lease renewal. Simply law it out in the letter what has changed, why it has changed, and let them contact you with any questions. It doesn't need to be a very wordy letter. Most tenants understand the market changes.

    Sometimes tenants won't take it well, but mostly they understand. Please let me know if you have any questions about this.

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  • Jeff Pollack
    Real Estate Investor · Redwood City, CA · Member since 2012 · 272 posts · 399 votes
    10y

    @Bill Zepeda,

    Just keep it simple and do it by mail so everything is in writing and business-like.  Just send a letter by registered mail contains the following:

    name, address, reference to the date of the existing lease, the amount of the increase and new rent amount, the date it goes into effect, and the date by which they must accept or give notice.  

    Do not give a reason for the increase.  They are your tenants, not your buddies and you are running a business. 

    You can increase the rent as much as you like or as much the market will bear as long as there is no rent control.  If they have been there longer than a year you need to give them 60 days notice.  It is a seller's market.  If they don't stay, no big deal.  In our market you'll have the place rented at market price to any number of highly qualified applicants inside of an hour with a Craigslist ad. 

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  • Dave MeyerPro Member
    Head of Real Estate Investing at BiggerPockets · Seattle, WA · Member since 2015 · 224 posts · 826 votes
    10y

    Just be direct and to the point. I usually combine the rent increase in an email inquiring about the tenants' interest in staying. Something like: 

    Hi, 

    Seeing that your lease is up in 8 weeks, I wanted to check in to see if you're interested in renewing your lease. You've been a great tenant and I'd love to have you stay. That being said, to keep up with market rates and my own expenses I will be raising rent to $XXXX for the next year. If that works for you, I'll draw up a new lease and we can schedule a time to meet and sign it. Please let me know if you have any questions. 

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y
    Originally posted by @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.

    Me too, and I think when we post info that comes to be seen as incorrect, we need to MAN-UP and get corrections noted. We DON't need another facebook level site of FUD(Fear, Uncertainty and Doubt) nor rumors and inaccuracies.

    1Reply
  • Charlie A.
    Accountant/RE Investor · Saipan, MP · Member since 2014 · 11 posts · 1 vote
    10y

    A lot of good info here. I'm with Nathan Gesner on this. Good luck, bud!

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  • Mary Ann Casey
    Lafayette, CA · Member since 2013 · 91 posts · 45 votes
    10y

    A great topic here!  ...and perfect timing for me, since I need to raise the rent for the first time on some really great tenants and have been struggling with how to do that.  So, I will write a letter and increase rent by approximately 5%. Thank you to those who shared the verbiage they use in their letters!  Very helpful.

    This whole Bigger Pockets thing is terrific! You guys are always come through!

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  • Bill ZepedaPro Member
    OP
    Rental Property Investor · Brentwood, TN · Member since 2014 · 16 posts · 5 votes
    10y

    Thanks to everyone for all the great advice.  Update:  I sent my tenant a simple and polite letter that stated the new rent amount (+3%) without any justification, and attached the new lease.  They signed the new lease without any questions.  I plan to continue a straight forward, matter of fact approach and raise rents on an annual basis - just as my property insurance company does.

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  • Mike F.
    Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
    10y

    Before the end of every lease we send the tenant a choice of two new leases

    1) 12 month lease 

    2) 24 month lease

    They both have rent increases, the 24 month lease has less of an increase, guess which one everyone signs?

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