First time Rent Increase after 2 yrs, $100 too much on $1100 rent

[Jay Mayer]

Hello everyone, 

I am a new landlord with little experience and wanted to get some insight on a rent increase I am planning on my rental home. 

It hast been 2 yrs since the tenant moved in and assuming they want to sing up for a 3rd yr, I would like to increase rent at least by $50 in order to cover a recent interest rate increase on my mortgage. 

I initially rented the home $150 less than similar homes at the time because the tenant was a "known" person and they could not pay more (at the time the tenant had a lower paying job than today), plus it was convenient for me to have someone mover right away. That was that, probably a mistake, but it worked out so far in the sense of having the home rented and a good paying tenant. 

As for the numbers, from what I have researched online rents are up today by at least $200 more for similar homes. Rent is $1100 and a similar home would Rent for $1300 today. 

So I was thinking of a $100 increase to cover the $50 mtg rate increase plus $50 to get close to market price. At $1200 monthly rent after the increase, It would still be cheaper by $100 for them to stay versus finding a similar home, but they may not see it that way and I don't want to piss them off or make them leave because a $100 increase could be a shocker. 

So should I go for $50 or $75 or $100 or what number would you suggest?

Sorry for the long post, and thank you in advance for your insight you may have. 

Have a great day. 

[Joe Splitrock]

@Jay Mayer some people will tell you that a tenant will not move over a rent increase, but I can assure you that it will cause them to start shopping around. Assuming you are still well under market, then they will probably stay if they can afford it. You have to weigh the risk of potential vacancy. Look at it this way, one month of vacancy is the same as $100 less per month in rent over the next year. That doesn't include your time and expense to get he property re-rented. In other words if they move out, it would take you 1-2 years to recoup the vacancy loss with a higher rent. 

I would give them the $50 increase and then do $50 again next year. For my best tenants, I don't even bother increasing rent. When they move, I just bring it up to market.