When is it cool to raise the Rent

Question

When is it cool to raise the Rent on a 4 plex after you done brought it

Nathan P. · Answer

Depends on what type of landlord you want to be.

Based on the subject it sounds like your shooting to be the "cool" landlord. I would recommend always being professional in your approach and systematic with how you do things. If it seems random to them they will think your trying to drive them out or discriminating.

Let them know well in advance that you will be adjusting your rental rates. Tying this increase to a general milestone makes it seem more common (e.g. New 2020 rental rate).

Let us know what other ideas you have for your approach.

Charlotte Dunford · Answer

I give 30-day/60-day notice to raise rents by $50 first day of ownership, if this was allowed according to their leases. When is it cool? Whenever it's not at market level.

John Warren · Answer

@Quinton Bogle as others have stated, raising the rent is not a terrible thing to do. In fact, it protects your investment. You are buying an income stream when you buy rental properties, and inflation is always working to decrease the value of your cash flow. Rental raises protect you from water increases, electrical increases, trash increases, tax increases, etc. Your costs go up, and so should your tenants.

At the same time, you should always look carefully at the market in general. Know where your rental is positioned in the market, and know where the tenants could go to get a comparable unit if they needed to. Price your rental accordingly by doing "nuissance" raises. In my first property, which is a four unit in Lyons, IL, I have always raised the rents $20-25 per year. The rents are just under $800 per month which is very affordable for the area, but I think top of market is only around $895 if I renovate. I am happy, and my tenants can't very easily get a better deal elsewhere.

Nathan Gesner · Answer

If the tenants are more than 10% below market rate, I would give them written notice on the first day of ownership. I would let them know rents are increasing in 30 days and then give them the option of signing a new lease with the new rate or signing their 30 day notice to vacate.

If you bump the rents, be sure to bump the deposit to match it.

After the initial bump, I try to do an automatic 3% increase every year to keep up with market, or close to it. Then I leave the big increases for turnovers.

Matthew Ringer · Answer

@Quinton Bogle

Depends. Maybe they are great tenants and it’s not worth losing them trying to squeeze an extra $50/month. When a tenant moves out and the unit goes back on the market  is a good time to raise. Or if your set on raising rent on your current tenants at lease renewal time. This all assumes you’re under market to begin with.

Account Closed · Answer

We (the owner and I) told tenants we raised the rent every year, but normally only between $35 - $50/month.  They were on M2M, so they were concerned about that.  We raised rents in the summer.  People can usually handle the news easier in the summer (not holidays, etc.).

For tenants who were new and worried about the rents being raised more often, I'd write a clause in the rental agreement that if the tenant was in good standing that the rents would not be raised for 12 months.

They still will complain (or there's always a percentage that will complain), but then they check Craigslist to see if it's worth moving, and I always priced low enough that it wasn't, so they'd stay.

Anthony Wick · Answer

@Quinton Bogle

As soon as their current lease ends. If they are MTM, then immediately, with the proper notice as required by the lease or local laws.

Theresa Harris · Answer

Assuming your rents are below market value, raise them when the lease is up.  Remember that a vacancy can cost you.  While it is rented and tenants are renewing their lease, do a modest increase for good tenants.  They will get used to small increases every year-again assuming you are keeping up with the market.  In between tenants, put it up to market value.

Evan Polaski · Answer

@Quinton Bogle  Obviously, not in the middle of the lease term.  I do 2-3% on an annual basis, or if a tenant is already sort of high I may keep them flat for a second year, then raise 5%

When is it cool to raise the Rent

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