How often do you raise rent?

[Mike Gordon]

I own a couple of SFR and I haven't consistently raised rent the last few years. I've readjusted the rents to just under market while vacant. Both are in relatively strong rental markets (Los Angeles, Tucson). As a landlord do you raise the rent every year or do you wait a few years to step up to a new rent? I'm planning on raising the rent on both houses next year when the leases are up for renewal but this would be the first time in 2 or 3 years for each.

[Nathan Gesner]

Originally posted by @Mike Gordon:

I own a couple of SFR and I haven't consistently raised rent the last few years. I've readjusted the rents to just under market while vacant. Both are in relatively strong rental markets (Los Angeles, Tucson). As a landlord do you raise the rent every year or do you wait a few years to step up to a new rent? I'm planning on raising the rent on both houses next year when the leases are up for renewal but this would be the first time in 2 or 3 years for each.

The cost of life always goes up. Milk, gas, taxes, insurance, lumber, sneakers, etc.

When the lease is up for renewal each year, it includes an automatic 3% increase. This ensures I'm at least keeping up with increased expenses like taxes or insurance. The 3% is disclosed in the lease so the tenant knows about it for an entire year, and then it's easy for them to accept because it's small ($30 for every $1,000 in rent). Any time a tenant complains, I just tell them to shop around for something comparable to see what prices are like and to consider the cost of moving. They never, ever leave because of 3%. 

I reserve larger increases for when a unit turns over and that's when I play catch-up for any big market swings. Now, if the market went really crazy and jumped 20% in three years, my renter would be behind with just a 3% increase each year. But there's nothing stopping me from a larger increase. The 3% is automatic, but I can always bump it higher at renewal if the rent rates really jump. I had a situation recently where the tenant has stayed for many years and was now 12% behind market. I renewed him with the 3% increase but let him know next year will be a complete catch-up. He has an entire year to watch the market, but he's already indicating he knows the rent is low and will stay.