Strategies on increasing tenant rent

[Nick Ferrari]

Iron Sharpens Iron. I want to hear your most effective ways at increasing rent from an already existing tenant.

I personally write up an email or letter 60-90 days out from renewal explain that their rent will be going up due to a number of reasons and that hopefully the service we provide is enough to convince them to stay (said in much more political terms then that).

What do you do for your tenants? How would you improve my method? Thanks guys!

[Costin I.]

Nick, here is what we send - let me know if you find improvements to this:

Subject: [Property] Rent Increase Notice
Importance: High

April 23, 2019
[Tenant and Tenant]
[Property Address]

RE: Notice of rent increase

Dear [Tenant and Tenant],

The time to discuss lease renewal for your rental is fast approaching and we wanted to let you know our plans and give you plenty of notice for you to plan accordingly.

I want to take a moment and let you know how much we value both of you as residents. It is not easy to find residents that pay their rent on time and also take care of the property. Unfortunately, due to consistently rising associated costs, it has become necessary to increase your rent.

This letter is to formally inform you that starting on [Date], the monthly rent for the house you currently occupy at the above address will be raised 2.7% (below the national average of 3% and well below the [City] MSA area of 7%)from $[rent] to $[new rent]. The payment is due on the first of each month. Your lease will officially be over on [Date]. We would like for you to continue as our residents, but an increase of $[$$] will be applied to the new lease term. Please note that we are informing you more than [NN] days in advance per the terms of your Lease.

We consider the current market rent for [Property] at $[N.NNN]. However, since you are already established in the property and if you decide to continue leasing with us we will not incur the make-ready expenses required to prepare the house for top market rent, we consider that warrants a monthly$[NN discount].

Your monthly rent is the only change in the original rental agreement – all other terms and conditions of your lease will still apply.

Please remember that if you choose to terminate your Lease, you must provide the required written notice according to the terms of your Lease. Failure to provide this required notice indicates your approval to continue the Lease with this rent increase.

This increase was not a stress-free conclusion and that our desire is for you to continue as residents. Again, I thank you for taking care of the property and being good residents that you are. I hope that you will continue to remain a resident at [Property]. If you have any questions or concerns, please feel free to call me at [phone].

Sincerely,{PM}

I included some more information to detail this matter:

Q: What is the justification for this increase?

A: Here is some of the backup justification that went into consideration of this decision:

-Property taxes and insurance rates increase every year necessitating an increase in rental amounts in order to continue to maintain your home. I am forced to raise the rent because the local property taxes in this area have been increased by 8.5%, from $5271 in 2017 to $5715 in 2018 to $5,979.

-Inflation affects us all, and that means the variable costs such as maintenance, building materials, and labor go up which needs to be covered by rent increases. Unfortunately, we have experienced some substantial expenses with this rental property in 2018.

-Comparative Rental Market Analysis – we used two realtors and multiple online tools to assess the rental CMA - the neighborhood shows a $0.75 per sqft corresponding to a rent range of $[N.NNN].

-Alignment in Rental Market value:

• According to the Zillow Rent Forecast, Austin, annual median % change for 2019: 4.1%.
• The average rent for all apartments in the Austin area hit a 7.5 percent increase from the year before.
• The Austin American-Statesman reports that the trend of rising rents is only expected to continue in 2019.
• Capitol Market Research, which tracks Austin-area rents, estimates a 5 to 6 percent increase in 2016.By the end of 2016, rents are projected to jump up to $1,741 in Austin
• Rent has climbed 7% in Austin. In all these cities, rent is growing more than twice as fast as the national average of 3.3%.

Q: How much might cost a decision to move?

A: If the move is in an effort to avoid a rental increase, here are some numbers to take in consideration. For example: [a three percent (or $30 per month for $1000 per month property) means to pay an additional $360 per year]. The time and cost to move may be far higher.

How much time is this going to take? How much traveling will you need to do? How many hours of work will you need to take off? And then how much will the new property cost on admin expenses?

Application fees, First month’s Rent and Security deposit. To begin with, no matter where you go, chances are you’ll be required to pay not only first month’s rent, but a security deposit as well, cleaning deposit/fee, in addition to non-refundable applications fees.

Utility Deposits. You may be required to pay new utility deposits. Have you checked what those costs will be?

New items. For any new property, there are always needed purchases such as window coverings, shower curtains, even furnishings.

Moving Truck. A typical U-Haul (our local rate) is $19.95 per day for a small truck. There is an additional charge for mileage, blankets, boxes, insurance, and tax (usually adding up to a total of $50+).

Time and Effort. Few people ever calculate how long it will take to pack and unpack everything they own, in addition to the carrying, loading, and unloading time and effort. Even if friends and family pitch in, what is everyone’s time worth? Not to mention the effort involved in gathering enough boxes and packing materials for everything you own.

Children. Will you be able to keep the children in the same school district or near their friends? Moving is a very stressful time for everyone involved, including pets.

And keep in mind, it will happen no matter where you go - no matter where you move, your new landlord’s costs will also continue to increase and so will your rent. Remember: Moving is stressful, costly, and a complete pain.

Q: Will there be a new lease extension to sign?

A: Yes, a new Extension of Residential Lease agreement will need to be signed. See attached.

Q: Will there be an increase in security deposit?

A: Rent increases often trigger security deposit increases. This means that if the rent goes up legally, the security deposit may also be legally increased. However, we will NOT demand an increase in security deposit with this lease renewal.

Q: Will you accept an extended lease?

A: If you want to lock in rent for a longer period, we can discuss options.