I'm a bonehead(?): I agreed to PM suggested large rent increase

[Marco G.]

I purchased a number of adjoining properties mid last year. This unit came tenant in place on their first year lease. My first lease renewal of 2016 comes up next month and PM suggested a 9+% rent increase. I was very apprehensive about such a large increase and discussed it with them and they didn't think it would be a problem, and if it was, they'd ask for a "counter offer" now that they knew I was willing to be flexible. All of this seemed contrary to how I would do it myself, but the increase would bring it up to par with new leases over the past few months AND I'm really trying hard to not be such a micro-manager. I also expressed my apprehension especially because the property will require a month of vacancy and a few months worth of rent in rehab/updating with what needs to be done. Oh yea, and the leasing fee. Tenant immediately put in their notice to vacate. Tenant always paid on time and never made any frivolous service calls. I let them talk me into it against my gut feeling and feel like an idiot. I'm sure I'm not the first, has anyone had experience salvaging the tenant relationship in this instance? I feel like I can't really go back and say "just kidding, no increase for you"...

[Chris Mason]

Disclaimer: I am not an expert in how property management compensation plans work, never having used one and it not being relevant to mortgages except as a single line on Schedule E of tax returns.

Your PM company gets paid more when a new lease is signed, than they do when a great on-time tenant extends their lease for another year for another year of on-time money in your pocket? 

Wouldn't that kind of create a perverse incentive to have tenants move out each and every year, so they can get a new leasing fee? Thus, is it the case that your PM company got paid MORE for screwing this up than they would have gotten paid for doing what you wanted? 

I'm not rocket scientist, but it may be worth just being completely 100% honest with the tenant one-on-one about how it played out and how it went down. A reasonable person might just understand, and decide that she wants to continue to be your excellent tenant. 

Aaaaand then go renegotiate that agreement with the PM company. If you appreciate stability and reliability, the PM company should be paid more when a tenant stays on for another year, and less when a tenant vacates. If that's what you want, anyways.

Again, I'm no rocket scientist, but I kind of think the folks working for me should be paid more for producing the outcomes I want, and less for the outcomes I don't want. My folks get paid more for fast or on time closings (whichever the clients want), and for clean loan approvals (relative to the borrower's situation). 

Because that's what I want. You get what you pay for.