Increasing rent

[Luke Stair]

I just purchased my very first rental property which I am managing and running myself.  It's a multifamily complex and 3/4 units a occupied.  One unit is empty as I am renovating it, one of the tenants will be leaving in October, the other tenants lease is up this month.  I want to increase the rent for the tenants lease that is up this month because it is very low for the space they are getting (1,054sq.ft.) and well below the average for the area ($595-650).  I was going to raise it $45/ month.  This would increase the rent to $595/month.  My reasoning is that I just replaced both the front and back doors, have done many neglected repairs in her unit and will be putting in a privacy fence to give each unit its own private space.  I feel this more than justifies a rent increase.  My hesitation is I do not want it to push her out.  Greatly appreciate everyones advice.       

[Thomas S.]

You are operating a business and knowing that the rent should be possibly $650, about $100/month low, and not raising it directly to that mark means you are really operating the business as a hobby.  

Your business should be getting tenants that are freely willing to pay market rent. The argument that "I have a good tenant and do not want to raise the rent too high for fear of losing them" attitude is amateur thinking at best. Landlords that give any tenant a rent break, under market, are really just afraid of the responsibilities of operating their business or are lazy. Done professionally there should be no vacancy time therefor no loss in revenue.

This tenant is your opportunity to start your business. Raise her to full market, give her 2 months to leave and yourself the two months to find a better tenant and move forward doing what you are in business to do, make the maximum return for your investment as possible.

Supplementing tenants rent is a welfare mentality not business.