Taking over fathers rentals

[Luke Benson]

I have a 1800 sq ft split level house in St. Cloud MN that has had the same renters since 2011. They have been on a month to month since October 2012 and rent hasn't been raised since then. Right now they pay $1100/ mo and all utilities. In 2012 they kept getting behind on the water bill and it was dinging my parents credit so they started paying the water bill and garbage (combined bill with the city) and the renter kicked in $25 to cover the garbage. I am in the process of getting a 1 year lease created for them to sign they want 1 year. I did the math and if we would have kept up on 1 year leases this would be the rent increases over the past few years. 2012-2013 $1133 2013-2014 $1167 2014-2015 $1202 2015-2016 $1238 2016-2017 $1275 The water bill is $135 a month on average. So in reality my parents have only been getting $956 before expenses a month for the last 4 years (super cheap). How can I raise the rent and justify it to the tenant? Can I itemize the water bill as an additional expense they can pay monthly? We were considering putting a new furnace in this year, would that be enough to offset the rent increase? These renters have been awesome always paid, take great care of the house and always send me pictures of things I might want to know about. Thanks for the advice!