How to raise the rent

Question

I  a rental property that came  a long-term tenant. I would like to go up on their rent as it is a little low, but I haven't mentioned this to them yet. A couple of days ago the tenant asked if she could get new carpet. She wants to cover the expenses, with me paying for everything up front and her paying it back in monthly payments in addition to her rent. My questions is: How can I use this as an opportunity to increase her rent permanently? I would intend to pay for the new carpet myself if I went this route.

Leonard L. · Answer

Two quick points.  One, as mentioned on many podcasts, always best to introduce yourself as property manager rather than owner, so that you can blame rent increases, etc. on the distant evil landlord while maintaining the relationship yourself with the tenant.  But that horse may have left the barn.

Second, I would not tie the two together.  Their rent is simply low, as you state, compared to the rest of the market.  I usually pay for the carpet, but I also am not shy about saying, look, I did a market survey and your rent is X and average rent for this size unit is Y.  Which means your new rent is Y.

This is how I do it.  My property manager and I agree on the new rent amount we are going to demand.  Property manager then sends a notice 60 days before the annual lease expires saying please check one box: either  (__) I want to renew the annual lease and I acknowledge the new rent will be $xxxx (the new higher rent amount); or (____) I intend to move out at the end of the lease.  We also include a market survey backing up the new rent.  The vast majority of tenants just check the box for the higher rent.   A few call and say I want to stay but at the same rent, and we explain that is not an option.

Thomas S. · Answer

Tenant 1.hoarders are destructive and usually a health/fire hazard and insect infestation problem. You would be making a mistake keeping this tenant but that is your decision. Raise the rent to market, not close to market, there is never any justifiable reason to supplement a tenants rent. Some will suggest it avoids turnovers but there are no states to support this excuse. If they can not afford market rent they are a high risk tenant.

Tenant 2, you do not ask them to move you issue a non renew notice as outlined in your state landlord tenant regulations. You are obligated to know all your stste codes. They can reapply aftr reno but obviously you would reject their applicaton.

Initiate a no smoking policy and use auto renew M2M leases.

Thomas S. · Answer

It is difficult to understand your problem.

If the rent is below market, and assuming the tenant is M2M or approaching the end of their lease, you simply send notice that you are raising the rent to market. The state landlord tenant codes will spell out the process of giving notice.

If the rent is below market it is not necessary to make excuses of find reasons to increase rent. You just send the notice and raise the rent to where it should be.

Brian Eilering · Answer

Thank you for the reply @Thomas S. . I understand each state has different landlord/tenant laws. I am reading now for Georgia regulation and it seems, as I expected, we have a 60 day notice which we are fine with.

It sounds like you are suggesting I do a new MTM lease for these two tenants in which a no smoking policy is in place?  Do you have a suggestion for a relatively easy way to accomplish this goal?

Brian Eilering · Answer

WE just purchased a triplex in the Metro Atlanta area.  It is in the northern suburbs.  Two of the tenants are month to month and the other just signed a years lease before we purchased.

My intention was to bring the rents up close to market rents using nearby apartments as comps.

Obviously, the one that just signed the new lease is locked in for the duration of the new lease.  They appear to be the best overall tenant.  Clean unit paying on time.

I would like to raise the rents of the two MTM tenants.

Tenant 1.  She is a hoarder but seems to be a decent tenant.  I would be fine if she were to stay with the increased market rents.

Tenant 2.  This unit is in the worst shape and has a smoker in the unit.  We would like to renovate this unit and simply find a new tenant.  Can I ask them to vacate while we are renovating then they are free to re-apply once renovation is complete?

In short, all three units require a different strategy.  I wanted to see what the thoughts were on different ways to accomplish what needs to be done.

Michele Fischer · Answer

I would suggest offering to cost share the carpet, that is generally how we approach upgrades that the tenant requests.

We also annually raise rent to the midway point between market rent and current rent, to keep making progress but also reward long term tenants.  Sort out if you are better or worse off if they are unwilling to pay a rent increase and leave.  That answer helps drive your position on both issues.

Another thing to ask is whether the market rent you are are comparing against includes the upgrades or not.

Michael Lucero · Answer

Just tell them you are raising rents to market rate (if thats true) and what the new rate is. They will either pay it or move out. Why would u pay for the carpet if they were willing to. Are you trying to raise the rents like say "ok becuz im paying for carpet rent is going to be X forever" or something. You seem to be making this way more complicated and emotional than it needs to be.

How to raise the rent

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