Increase rent during pandemic, should we?

Question

Good afternoon everyone, all inputs are much appreciated.  We have a 3 family house with each unit having 3 bedrooms.  The going market rate now in Worcester MA is between $1400 to $1600 if I'm not mistaken and I only rent out my unit for $1,000 because they are long term tenants ( 4 years and 5 years).  We want to increase our rent to $1100 but we are hesitant because of the pandemic.  Any thoughts?  Thank you.

Ian Hogan · Answer

@Quan Tran Generally I think this dependent on how good of tenants they are and what they do for work (have they been effected by the pandemic). You will likely face the issue that the tenants are not used to rent increases but no time like the present. Like mentioned above by @Amy Davidson, a light increase of 3-4% is safe. If you have a fear of losing your tenants there are more out here in Worcester, I recently filled one of my units in Worcester for October. During this pandemic, even with courts reopened, having the right tenants is more important than ever.

Dave Spooner · Answer

@Quan Tran We have not increased any of our rents on tenants. In fact, for those that had their income disrupted, we waived some rent and deferred others. It's a global pandemic and we're happy to have good, solid renters. We also want to keep them long term and working with them during this time goes a long way towards that.

That being said, if you have increased expenses, it's completely justified to pass some or all of that onto your tenants. I'd suggest doing exactly as Amy said. Show them where your costs have gone up and they'll likely be understanding.

Amy Davidson · Answer

I've raised all my rents to varying degrees since March and haven't had too much pushback.    Some tenants I've shown the increase in the tax-bills over the last year and raised their rent by the same percentage as the property tax increase.

Another tenant, who has been in place just 1 year and was already paying top of the market rent, had a "token increase" of $4.50 just so he gets used to the fact that there will always be increases in the rent.

I recommend an increase of at least 1% so that you have to sit down and have a conversation with everyone.   However, the 10% you mentioned might be pushing it to do in one go.  Perhaps you could start with a 3-4% increase and let them know your intentions to gradually raise the rent to approach market rents.      Just my 2 cents.   Keen to see what the others say.