Raising rent on a friend in a hot market

[Neil Gupta]

I rented out my beautiful home to a (kinda) friend. I only accepted a half months deposit and rented it for $1700 ($100-150 under market value). I just wanted someone to take care of it. Over the past year, the value (and rent) on my home has gone up considerably. My agent friend told me I should be getting close to $2200, I think $2000 would be ballpark. I've checked other available homes and mine is way bigger than anything available for $2000 a month. 

My tenant "friend" has paid rent on time but has rubbed me the wrong way on occasion. I know for a fact that her husband got a $700 a month raise. Her lease isn't over until May and she wants to renew now, I know why. I don't mind renewing but I am going to increase her rent. Question is how do I propose this to her and by how much do I raise the rent? 

Any tips and suggestions would be helpful. Thanks in advance. 

[Mike Cumbie]

You have gotten some good advice. My suggestions:
1) First never rent to friends or family unless you want to make a donation and are comfortable with that.
2) His raise is not your concern just as if he lost a job wouldn't be. Setup your prices and go from there based on the property not what someone "can pay" or "wants to pay"
3) Raise the rent to market rate if you think you can get it right now. But odds are you will be losing a friend one way or another. So I would say just expect that outcome and get the bandaid off sooner rather than later.

Good Luck!