Looking to raise rent on my Denver SF House rental property

[Arnie Clark]

I currently own a rental in Northglenn Colorado a Northern suburb of Denver CO. Its a 2k sqft, SF home with 4 bedroom, 2 bath, 2 car garage, large backyard with a large storage shed. It is an older home that we lived in for 16 years but remodeled the kitchen and both bathrooms before we moved out and made it a rental. The house even has solar on it so the renters do not have a monthly electrical bill except for $16 to stay connected to the grid.  I also have a lawn service to maintain the lawn. I am currently charging $2100 a month for rent. They have been in there for 2 years, i have auto deposit setup for the monthly rent so they have not missed a payment. They are kind of hard on the house. No holes in the walls but their version of clean and tidy is not mine. That and their 2 dogs have scratched up the new interior doors i just put in as well. Would a rent  hike of $200 a month which would take it to $2300 month be out of line for the current Denver market? Thoughts or suggestions please?

[Andrew Kerr]

Hi @Arnie Clark - Let me start off by saying I am not familiar with your specific market, but here are some rules of thumbs I have lived by when raising rents plus a couple other thoughts:

A 10% increase is a lot. Most people tend to live paycheck to paycheck, so coming up with an extra $200 a month could be tough even if their current rent is under the market rent.

Actually determine your market rent. You might know exactly what it is, but from reading your statement it made me seem like you were a little vague on it.  I love using zillow, trulia and rent-o-meter to get averages for my area so I can see what actual market rents are and then use that to determine a strategy.

I have found 3-5% yearly increases seem easier to manage for folks. I also round this out, so going with $25, $50, $75 increases versus $68. I also try to avoid going to the next hundred dollar market, so increase to $2095 versus $2100, or $2195 versus $2200. 

Its easier to close a big gap on market rent by going with new tenants. Try to determine whether it is worth possibly loosing your current tenant, then having the expense of vacancy and repairs (like the damaged doors you mentioned) to make the unit rent ready again. As an example, maybe you loose one months rent, and then need $1,000 in repairs. This would set you back $3,000 if the tenant moved out, it would take you 15 months at the higher rent to break even. For me, this risk wouldn't be worth it, which is why I try to do small incremental rents every year versus getting behind market rents and then try to do big increases all at once.

Good luck and let us know how it turns out.