Investor · Hamlet, NC · Member since 2017 · 35 posts · 6 votes
Wanted to get the opinion of other folks on here. I have a property that I have a long term tenant in. It is an older couple and they have been there almost 10 years. I have only raised rent one time in the 10 years and that was about a year ago. It is a little (less than 900 sq ft) 3 bedroom house. Market rent should be about 100 to 150 higher than it is now.
Should I raise the rent maybe 50 dollars or should I leave it alone. I don't want to raise rents and then they move out and then I get someone else who doesn't pay right. They have never missed a payment and have only been late one time in 10 years and they called that time about a week in advance and let me know.
They take very good care of the property and actually fix things themselves when they break and only call me if its a major problem.
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
7y
A great tenant is priceless...and they're also saving you money by fixing/maintaining the property. I don't think you need anyone else's advice. You're doing just fine without us.
I probably would treat this in smaller increments than $50. Should your tenants be an elderly couple on social security, they have no means to increase their income. You probably know by now if they live comfortably or very modestly. People do move to avoid a $600 annual rent increase if they feel they need to. You probably also have an idea of what the tenant turn around costs would be after they have been living in your place for 10 years. It is a judgement call.
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
7y
A great tenant is priceless...and they're also saving you money by fixing/maintaining the property. I don't think you need anyone else's advice. You're doing just fine without us.
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
7y
Be prepared for about 50:50 on the answer you get....
50% will be in the " a good tenant is priceless and don't risk a turn over"
50% will be " you need to keep up with the market rent to maximize your investment, don't be scared of raising rent"
The real issue becomes when you don't do it for years and years out of fear and then you realize how far behind you are from market and then you start thinking of big % increases. Much better to slowly increase it every 1-2 years and keep pace with your increasing costs (insurance, tax, maintenance etc etc) and market rate.
Good tenants are not "priceless"..... they are very valuable..... but not "priceless".....
I would increase it $25 each year......
But as stated you will get a very 50:50 rate of answer here.....
How often do things break and they fix them? Add up those 'savings' and go from there. If the place has been on autopilot for 10 years because they have been taking care of it and you are only $100 below market value, I'd be tempted to leave it. Yes you are leaving $1200 a month on the table, but between turn overs, vacancies and repairs, you might be even.
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
So, they fix the place and make repairs do they? Except, a huge majority on BP state don't let your tenants fix things. Why? Because when they move out you may just find they fixed your place right into a lawsuit or a hazard. I know the OP asked about raising rent today, but the mistake was made 10 years ago, and continuing. Now, since I sounded so mean there, I would also like to say if he is not into real estate for the profit, then none of what I said actually matters.
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
7y
@Michael Dorey, to provide a better response we need to know how much you're currently profiting.
If you own the rental free-and-clear then I wouldn't risk it for $50/month ($600). Keep it steady.
If you have thin margins and a big ticket expense (i.e. HVAC, water heater) going out will result in a losing year, then absolutely. You have to cover not only your expenses but potential expenses.
Tenants who have lived there for 10 years probably won't move out because of a $50 raise, unless it's every year. I would find reasons to valid your rent raise; taxes typically go up annually. I am willing to take $.90 on the dollar if I knew my tenant would stay tenant years! As a landlord, our biggest exposure is vacancies.
You can also offer to make updates to the rental and increase their rents even more. Charge $100 more but update the appliances or something else that'll last a long time. Or ask them what project they would like and be willing to have a conversation. Anything to keep a great tenant!
Rental Property Investor · Sunnyvale, CA · Member since 2019 · 60 posts · 40 votes
7y
I agree with @Dante Feria. It's rare that one of our property's taxes don't go up annually. We only raise rents every 2 years if the tenants stay. It's not worth the risk and typically our tax bumps are only $100-200 max.
I actually did what @Kenny Dahill suggested and asked one of our longer term tenants what they wanted. For them, the house was great but they wanted some improvements to the backyard. We let them decide the scope within a budget. A few plants and string lights. It cost $150-200 but they were willing to stay at least another 2 years.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
7y
What is the current rent? Being $150 below market on a $600/month place is a lot different than being $150 below market on a $3,000/month place.
Assuming that the difference in market rent is around 10%-15%, I'd probably do a small increase, maybe $25-$35. While you don't have to give a reason, upping rent such a small amount and saying to the tenant, "you know my property keep going up and so does my insurance and I just want to keep pace" is probably not going to get any push-back from the tenants.
Specialist · Santa Barbara, CA · Member since 2017 · 38 posts · 21 votes
7y
I personally would raise the rents $50 now and maybe another $50 every other year until you are closer to market rent. The reason they have stayed so long might be because it is so far below market value.
Rental Property Investor · Buffalo, NY · Member since 2017 · 206 posts · 185 votes
7y
I would supply the tenants with some comps in the area showing that their current rent is less than market rent. It will show them that even if they moved it would be hard to pay what they are paying now. It just acts as a way to justify the increase. I also add in that the increase is due to an increase in taxes, water bills, insurance etc. I write a formal letter that's attached to the lease renewal with this information on it. I list the address, size of the unit and amount of rent for other rentals in the area.
Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
7y
It’s honestly a toss up. I’ve gone back and forth on this myself.
Sometimes it makes sense, insurance increase, tax increase or a major raise in market rates.
Like someone else said, if it is a 600 to a 750 rent price, that’s 25% below market rate versus the 2000 to 2150 rate, that’s a 8% increase.
The other issue is the market rate based on the current condition of your property? 10 years is a long time of one tenant of deferred maintenance.
The lower your rent the more likely I am to keep up with market rent. You’ve trained your tenant that you don’t do rental increases. So now, if you chose, you’ll need to break that cycle. You could do it 25 dollars at a time annually. Almost no one will ball at a 25 dollar increase.
Specialist · Lenexa, KS · Member since 2014 · 23 posts · 21 votes
7y
@Michael Dorey the apartment complex I live in just raised my rent $300 a month guess what they said when I said why? There answer- it’s the market rent, the market chooses rent cost not us. Which i actually like the verbiage, I’m just on the wrong side of it.
Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes
7y
@Michael Dorey I'm in a fairly similar situation with a good longer term tenant that is paying somewhere in the neighborhood of $100-$150 below rent (even today). The past two years, I raised their rent $25 a month on each renewal, trying to get the rent closer to the market rent. I certainly want to make sure she stays, and didn't want to raise it over 5% per year in case I risked losing her as a tenant. This past year, I forgo'ed rental increases due to a major siding job that I had to complete on the property. There was a fairly large disturbance to their quality of life during the completion of the job. If I were to have to choose between market rent on tenants that are a little more discerning and slightly below rent with stable tenants that take good care of the property, I will always go with the higher quality tenant. Tenants that trash the property and turnovers are by far the most costly parts of the business (in my mind). Good luck!
Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
7y
@Michael Dorey It is always a balance between turnover, market rent and future expenses, like hvac replacement. The longer term tenants are worth lower rents mainly because you are kicking the rehab costs down the road...because after a certain time your vacancy cost will be longer so you can repaint etc. I have raised rent as little as $15 to cover higher property taxes but avoid turnover. I feel they are renting a slightly shabbier place every year (the fact that their wear and tear created the shabbiness is irrelevant) so at some point they will see moving as trading up and if they get it for the same rent they may do it. Just the way I look at it.