Increasing rent on an existing tenant

[Roy Mitle]

What strategies do people use to increase rent if a tenant is staying in your rental and wants to stay longer.

I have a townhome with 4 friends staying in it. They are pretty good and no issues. 2 of them are moving out and 2 more are coming in. The remaining 2 said they want to stay. The lease has been there for 1 year and expire end of June. 

How do you figure out how much to increase rent by. 

[Roger Vi]

@Roy Mitle
I never rent to friends, so take my advice with the assumption that I would treat every tenant the same regardless of our personal relationship.

I always find out market price and set goals to meet that price as soon as reasonably possible. It becomes simple math when you look at how many dollars you collect in 12 months at the current rent and at the market rent. Raise the rent so that you collect the same amount whether you keep them or they move out and you have to deal with the 2-4 weeks of vacancy + rehab. That way you win either way. If they move out, here is your chance to update your units (if necessary) and raise rents. If they do not, you raise rents a little and still collect the same amount in the next 12 months.

This is all assuming the market is hot, your units don't need major rehab, and it will be easy to find tenants as mentioned in the above reply. If this is not the case, I would need to know more details about the extent of your problems before advising.

Hope this helps.

@Roy Mitle