Raise rent $200 or keep good tenants?

[Bill Ward]

I have a single family home for rent (3 bed, 2.5 bath), current rate is $1300, the one year lease expires in December. Rent has gone up significantly around here, and assuming no major changes, I'm confident I could rent it for $1500. The current tenants have been good, always pay early and only complain if something needs attention. I was planning to raise them to $1365 (that's 5%) until I realized I could realistically get $1500. Even if they moved out and I lost a month of rent, the new rent would make up for it over 12 months.We haven't discussed if they wanted to stay after the lease expires anyways. If they leave on their own I would list at $1500 (maybe 1550) and either rent or just sell if I get no takers. Assuming they stay, should I just stick with the $1365 to hopefully keep the good tenants, or say too bad it's a business I'm going to 1500?

Thanks,

Bill

[Nathan Gesner]

I reward good (really, really good) tenants by keeping the rent a little below market, but try not to let it get more than 5% below. For your situation, that would be $1425 a month. So I recommend you compromise. Explain the market to them and offer to keep them at $1,400 a month. If they don't want it, you can put it on the market for $1,500 and find someone else.