How do you go about increase the rent without loosing a tenant?

Question

How do I go about increasing the rent without loosing the tenant and upsetting them? Which is the best way of doing it

Sam Shueh · Answer

It takes advance notice that you plan to raise the rent in advance. Then you advise them what you want make it slightly below the market. Unless they do not like your place, chances are good that they will stay, often they like you to make some improvement.

Thomas S. · Answer

Raising rent is based on two scenarios. First inherited tenants when you purchase. If the rent is below market you simply give notice, when allowed, that you will be raising rent to full market. Usually inherited tenants will not be suitable and you will be getting rid of them anyway so you don't concern yourself with them leaving. It is always best to find and screen your own tenants.

Second situation is not an issue provided you are giving annual notices that you will be raising the rent, tenants accept it will happen every year and will not move unless it was already in their plans. As long as you are at market and tenants are happy with the property they are not moving.

If a tenant does choose to move due to your rent rate it is a tenant that you are far better off without.

Keep your rent at market and you will never have a problem. Keep in mind tenant turn over will usually happen every 2-3 years on average naturally and you have built that cost into your expenses.

Fear of tenants moving due to rent increases is completely unwarranted. It is more of a concern for hobby landlords that have not adequately budgeted their expenses and think that tenants are likley to move on a whim. It simply is not the case.

JD Martin · Answer

If you are increasing it nominally, as mentioned above, it takes a lot of money and energy to move - so unless you're already at the top of the market or have a place that doesn't offer much for the price, it's unlikely anyone is going to leave over anything less than probably $50-100 (depending on market). If they do leave, they are either already maxed or were considering leaving anyway.

Your rent increases should make sense for your situation and your market. There's no hard and fast rule because "the market" is always a basket of possible properties including yours. Where you fall on the spectrum will govern a lot of what you can do with regards to increases. Further, you have to determine how hard you want to work. It's possible to rent your place in one day with a giveaway price, and it's possible to rent it over many months at absolute top dollar if you want to work like hell. Most landlords that I know (including myself) want to try to maximize price at minimal work, so that will take a lot of familiarity with your market (always changing) to understand where your place falls on the spectrum, and the level of demand that exists at any given time.

Dan Maciejewski · Answer

Everyone has already said great ways.  To reiterate, do it when you have the conversation about lease renewal.  In my state, for a year lease, it's at least 60 days out -- we discuss it, mention that our standard is 3-5%, and go from there.  We have already future paced them at the original lease signing to expect 3-5%, so when we do give them the 3% notice, it's not a shock.

If you aren't future pacing them at lease signing, consider it -- it makes everything smoother.  Setting all those expectations up front is wonderful.  It takes longer to go over everything at lease signing, and yet there are no surprises later: "As you remember as we discussed when we signed the lease, the late payment fee is obviously going to be $____/day: you can just add that to the rent check, thanks!". Or "Hi, ______, as you know, it's 60 days until your lease ends and it's time to talk about renewing or not -- we'd love to have you stay, and as we discussed, the rent is going to increase by 3%, which is _____$, making the new rent $______.  would you like to stay with those terms, or will you be drafting a 60 non-renewal notice?".  Something along those lines

Bob B. · Answer

@Chipo Asare I start out with a 24 month lease and the second year has an increase.  I explain to the tenant that there will be annual increases.  That way there are no surprises.

Matthew Paul · Answer

it takes time and money to move , a rent increase of $25 a month , the tenant wont like . But how much time and money will they spend looking for another place , packing up , moving , security deposits etc ?

Chipo Asare · Answer

Thank you very much for all your help

Mary M. · Answer

The best way is to research your area and make sure you will not price yourself out of the market - that is key. Be sure you look at similar units. Once you know what the market will bear,  then calculate what it will take to get there. If it is only a few percentage points then just let folks know that when they renew the price will be x. Or if they are MTM give them 60-90 days notice (just make sure you give longer notice than is required).

If you need to jump the rent up a large amount, I personally would do it over two increases.  Especially if you do not want to lose tenants.

As for how I let tenants know?  I talk to them either face to face or via text or email. I have a dialog.  Then once we agree what the path forward is ( they will sign another year lease with x increase, they will vacate) then I either send the new lease or I start marketing.  I find it best to dialog.  But I only have 10 units so I can do this.

I also dont believe in the iron  fist that so many here think is how to keep tenants :)

Adam Gollatz · Answer

Easy, take the emotion out of it. Serve them a notice that the rent is going up on such and such a date and what the new rent will be or they can vacate, just do it in accordance with the local rules/their existing lease agreement at a minimum. You can put a note in there that they can call you with any questions. If they call, dont be heartless, just explain that its a business decision and you would hate to lose them as tenants, but you cant afford to not raise the rent. Assuming you are just keeping the pace with fair market rent and you arent gouging them.

How do you go about increase the rent without loosing a tenant?

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