Offering improvements when new lease includes a rent increase?

Question

Hello all!

I have a SFR that I first rented out nearly two years ago.  The same tenants have been there the whole time, and their lease renewal is coming up.  They already told me they want to renew; we just need to sign the updated lease.

I have held the line on rent for two years now.  I would like to increase it about 2.8% (less than $400 a year), to keep up with the market, insurance, property taxes, etc.  I would call it a B-class rental, for the area it's in.

I don't think the tenants will object to this increase, but I have been considering offering some improvements to help "offset" the increase.  The two I've come up with are 1) offering to paint one or two of the rooms - they pick the color, I buy the paint and do the work or 2) giving them a "budget" of up to $X (X < 100 or so) for new light fixtures - they pick the fixtures from anywhere, locally or online, I buy the fixtures and install them.

Personally, I like the light fixture idea more - they're (usually) a lot faster to install.  Nothing is really wrong with the ones that are there now, but the bedroom ones are like the ones I grew up with in a mid-60s house (the square bent glass), and I figure they might like something more modern.  There is also a ceiling fan in the dining area, which always seemed a little weird to me; maybe they'd like a more dining-room-ish fixture.

Painting takes longer and is harder to do around their stuff.  They could do the classic "shove everything to the middle", and I'd throw plastic over it, but it's more work for both them and me.

Question: Is this a reasonable thing to offer at this time?  I want them to feel like they are getting some kind of value for their money.  Or is there something else I should offer?

Thanks!

Patricia Steiner · Answer

No...stop the madness!  Don't do it, Matt!

You've held the rent for two years without an increase.  What else could you have bought that was the same price two years ago as it is today?  Nothing.  If you feel that the rent increase you want is fair, then why do you need to suggest it's not by making some gesture.  This is business.  Prepare the new lease and let the tenants know that the rent will increase to $x...so glad you're staying.  No justification - it is the new rent.

Again, don't sabotage yourself.

Patricia Steiner · Answer

@Matt R.

I have a better idea...leave everything as it is and buy something for your own home! The tenants are obviously happy so why not let them be, don't fix anything that isn't broken, and move on. What tenants often times want most from their landlord is to be left alone. Your intentions are kind but you would be interrupting their lives with anything you do. And, if you absolutely-positively have to do something, please come to my house and feel free to switch away.

Bryan Blankenship · Answer

@Matt R. I'm with @Patricia Steiner on this one. Every renter KNOWS that rent will inevitably increase over time and with inflation, so they're probably thrilled that you've waited this long to increase it as it is. No need to go around offering upgrades IF the existing unit and its fixtures/structures/etc are in good shape.

The only way I'd say differently is if there are updates you've been wanting to do ANYWAY, but just haven't done because the unit is occupied; likewise long-term upkeep strategies. E.g. - Are there ceiling fans in any of the rooms? That's a pretty simple thing you can do if you really really want to add something. Is there carpet? Maybe it could use a good carpet shampooing. Definitely don't offer to paint anything!

However you decide to do it, don't include anything as part of the lease renewal. If you do anything, do it after the fact, in a casual manner, like, "Hey guys, I was thinking about doing XX to add value/freshen things up, when could I schedule that with you?" Just be prepared that as soon as you OFFER anything, the vast majority of people will perk up and suddenly remember everything ever that maybe possibly could be better about their rental unit. :)

Good luck, sir!

Michael Norris · Answer

If you don't subscribe to Jeffery Taylor's - Mr Landlord monthly letter and other info you should check it out. He has a solid concept built around "anniversaries" (not renewals!) and a choice of affordable perks the tenant can choose from that also maintains or improvs the property and when combined with a reasonable rent increase you are more or less doing the improvements on the tenants dime. win win.

Matt R. · Answer

@Patricia Steiner @Bryan Blankenship @Michael Norris

Thanks for the advice!  I went ahead and sent the new lease, with the new amount, to the tenants, without talking about any improvements.

Usually, when we sign the new lease, I do some regular maintenance afterwards anyway.  I might propose a simple upgrade while I'm doing that.

There is a ceiling fan in the dining area, which I have always found a little strange.  I had to clean it when I was rehabbing the house - did you know that ceiling fans accumulate a lot of grease and dust when they're 4 feet from the kitchen?  I might offer to move that fan to the master bedroom, and/or put a regular light fixture in the dining area.  The master bedroom got a fan box and 14-3 cable from the switch to the box when the wiring was done, so it wouldn't be a lot of extra work.

Offering improvements when new lease includes a rent increase?

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