Afraid to raise the rent.
Investor · Denver, CO · Member since 2017 · 6 posts · 1 vote
Since I started my investor training last year in April, I've talked to many people that have had rentals for years, and I always ask them, "when was the last time you raised the rent?", answer, "we haven't", I ask, "why not?" answer, "they're great renters, they really take care of the place!" I ask, "when was the last time you raised it?" the answers vary, but, between 5-8 years, and most of them here in Denver! I tell them, "renters know that prices go up, and expect rents to go up also, you are loosing money!" They look like they're afraid to notify the renters of an increase.
My question is; Are people afraid they'll loose their renters if they raise rent, is this a hobby or a business!
My comment; Please don't get caught up in this thinking, especially if you are an investor intent on making some profits.
There's no point in charging overpriced prices in my opinion because not only might the tenant risk leaving, but they may not be able to pay the rent well either. I don't try to make people struggle hard to pay their rent.
If they can't afford $900 per month they can't afford $850. If your tenants are that tight on rent you may want to tighten up your screening criteria.
It's quite common, and sometimes it's a bad idea, and every now and then, you might have a renter who is just that good of a renter, that it's ok not to increase rent by $25 a month or even $50, unless it's been that long. If it is a great tenant, and it is a family friend who basically intends on living there for decades, then I'm going to be very slow to raise the rent. Especially if they like to fix small problems themselves without contacting the management company or you.
There's no right or wrong answer to this, but GENERALLY, it is a wrong answer to not raise rents to keep up with the market.
Rents have to be increased because let's not forget, you have expenses and upkeep to pay yourselves. You've got management fees and repair expenses will exist year round. There's no reason to cheat yourself out of your own money and leave it on the table, unless you've got a very very good reason to.
I would never advocate sharp increases in rent prices though to previous tenants or more than $30 a month when renewing a lease. I am ok with raising prices to a standard price if the old tenants leave, and I need to put new ones in.
Never forget that no matter what property you are renting out, the customer is a lot better of a shopper than you'd like to think - especially with the internet and finding the best deals with minimal effort nowadays.
Having SLIGHTLY lower than usual rent prices are usually ok if you have just rehabbed a property, and would like to fill it up with tenants fast. Higher than usual rent prices will almost always result in long waiting periods (months) for someone to rent from you. Common sense goes a long way here.
When I first become a landlord, yes, I was very afraid to raise rent, because I was afraid the existence tenant would move out, and I would need to look for a new tenant.
Until that "special year" came, I had a tenant moved-out almost every month in all my different properties. After post ad, showing, screening, prepare lease almost every month in one year, I feel comfortable and have confidence how to looking for a new good tenant.
Looking for a new tenant is not a challenge to me anymore.
Since then, I raise the rent every year, but still slightly lower than the market price to renew lease.
For new tenants, rent would be above the market price due to current very hot rental market.
If I price it at market price, I receive 20 to 40 calls easily, and will rent it out in 3 days.
To reduce the calls to 5 to 10 calls, I price it above the market price, and still able to rent it out within 1 week at current very hot rental market.
This is a good measure. If you are receiving too many calls that fast, you might want to raise the rent anywhere from $25-50 a month
And once the calls get down to about 5 to 10 calls like you said, you know you've hit a good spot.
There's no point in charging overpriced prices in my opinion because not only might the tenant risk leaving, but they may not be able to pay the rent well either. I don't try to make people struggle hard to pay their rent.
Rental properties are a business, ask your tax guy
If you can't run your business and expect a profit margin then you simply shouldn't be in business.
Hard to understand why the hobby landlord does it.. OHH I guess I answered my own question they don't do it.. they pretend, get in debt, and sell to a investor.. that turns the property around and raises the rents...
The big boys know how...
There's no point in charging overpriced prices in my opinion because not only might the tenant risk leaving, but they may not be able to pay the rent well either. I don't try to make people struggle hard to pay their rent.
If they can't afford $900 per month they can't afford $850. If your tenants are that tight on rent you may want to tighten up your screening criteria.
Though my actual experience is limited I don't think it would be that hard as long as they are aware that it is coming. Let a potential tenant know that after every contract you reevaluate the market price and to expect a slight bump every year.
When I bought my duplex I was able to raise rent by $150 a month and kept my tenant even though nobody thought I could. I did it by explaining why and how I got my numbers, and also giving them plenty of time to find another place if the new rent wasn't acceptable.
When I am looking at properties to buy, I have noticed that many of the listings say "Current tenant paying way below market!", like it's a good thing. When I contact the listing agents, their stance is that if you make a few improvements you could easily get a higher rent. Why would I pay top dollar to buy a property if I have to rehab it and get a new tenant? If you want to maintain the value of your properties, you must get a market rent. Just my two cents.