Do you raise rent on good tenants?

[Chris Purcell]

My theory is if a tenant pays on time and takes care of the house, leave the rent alone until they move on and then adjust it for a new tenant.

Have heard so many times from friends where their landlord raises it and they're agitated.

What's your thought?

[Matthew Olszak]

I see a lot of justifications here about raising rent based on "being a business". So lets talk about some examples of how businesses work.

On a very low level, consider Home Depot. If you go in and buy (1) 2x4, you pay retail price. If you walk up to the contractor desk and order a pallet worth, you get a different price. Selling in volume has a value to HD, enough so that they are willing to accept a price below retail, likely because their cost per piece is lower that way. Are they simply home improvement material hobbyists because they left money on the table?

As an agent - my real estate business - I ask for a certain commission based partially on how easy a client will be to work with. I consider if this is a person who will be calling me twice a day vs someone who will only email me their signed documents, among other things. Those things have a certain value to me, so I am willing to give up a certain amount of my potential income to ensure I get the business and keep a long term, happy client. Repeat business (of good clients) and referrals have a huge value to me. Am I simply a hobbyist because I don't charge everyone the same rate or because I left 0.25% on the table?

In my rental business, I value long term tenants who pay on time, keep their unit maintained, and don't pester me with irrational complaints. I value that because those tenants provide me with low turnover costs, low maintenance costs, and require very little time of my time. Because of each of those reasons, those tenants net me a higher profit on my units, even if I am not grossing the highest income possible. On the flip side, I could charge everyone "retail" rents and get retail, one-off clients (tenants) who will cost me a higher % in comparison to the % increase in income, leaving me with a lower net.

Businesses are about building and maintaining relationships that are beneficial to both parties. Just because you can do something, like raise rents, charge certain fees, have certain rules, doesn't mean you should if it costs you your relationship with a client who brings you a high value. I'm certainly not advocating holding your rent @ $400 when the market is @ $700, but take into account the NET amount you are making on your tenants when deciding if its worth it to trade a 3% rent increase for a possibly broken business relationship with your client.