Would you increase rent?!?

Question

Hi,

I have a 3 bdrm, 2.5 bath SFH on Oahu that I rent for $3375/month ($3300 monthly rent + $75 for pets).  The rent includes monthly landscaping.  The tenants have been in the property for 1 year (they are military and will be here for 3 years) and they would like to extend.  They have been really low maintenance and I have not had any issues with them.

Would you offer a one or two year lease?  Would you increase the rent?  How much?

Thank you in advance for your help!!

Nathan Gesner · Answer

In the past five years, the national average for rent has increased 18%. Some locations have been even higher than that. If @Chris Szepessy rented his place for $1,500 a month and didn't increase the rent for five years, he would lose $3,240 in the fifth year alone. In a five-year period, he would lose about $8,000.

I pay my insurance on time. I pay my mortgage on time. I pay for milk every time. Nobody offers me an 18% discount just for doing what I agreed to do. I don't see why Landlords are so free with their money just because a tenant does what they agreed to do. But, it's a free country.

Insurance goes up. Taxes go up. The cost of materials and labor increases. Property deteriorates and requires more maintenance.

You should consider a minimum, automatic increase every year to keep up with the cost of living increases. My lease says every tenant is subject to a minimum 3% increase at renewal. It could be higher if the market is really hot or the tenant is really low. And if something changes, I can always waive it and look like a good guy.

Chris Szepessy · Answer

I have a tenant who's been with me for 5 years...I haven't raised his rent. I know it's not the right business move, but he's easy to deal with, never complains, pays his rent, takes care of basic maintenance, etc. which at this point, is more important to me than making more money. I know he won't be there forever, so I'll raise the rent to market value when he leaves. If I was in your shoes, I wouldn't raise the rent and I'd offer the two year lease to them. It'll be a "carefree'' two years for you.

John Morgan · Answer

@Elin Trinh

I’d only go an extra $50. I tell my tenants my property taxes and insurance have gone up quite a bit. Then they feel lucky I only went up $50 or whatever. I always offer my good ones one or two year leases with that slight bump up. They all take the two years. Lol

Scott M. · Answer

A very personal decision.  Some will raise rents every year w/o question and some, as clearly you can see in this thread don't and lose a lot of money.  Then you have everything in between.  It all comes down to what type of landlord / investor you are.  I think a lot of landlords don't raise rents simply because they have a good tenant, pay on time, low maintenance and they are too afraid of the potential mind field of bad tenants out there.

And by the way, no judgement from me.  Like I said this is a highly personal question.

Most have a soft spot or two and for some that would be current military or vets.  So you have a lot of things to consider I am sure.  Last year we didn't raise rents across the board because of COVID.  This year market rents have jumped so high that we are, almost across the board, raising rents.  The increase locally has been very dramatic.

I don't think there is anything wrong with staying close to market rents if the condition of the home warrants it.  Maybe you raise a bit but stay below.

i do get your dilemma.  Keep the angels you know or risk the devil you don't : )

Doug Nordman · Answer

Elin, my spouse and I are military retirees who’ve lived on Oahu for over 32 years.  We’ve landlorded a 4BR/2BA SFH in Waipio Gentry for 24 of the last 27 years, and our current tenants are military.First, I’d check the market rent for your neighborhood.  Unless it’s gone up over 10% (over $330/month!) I’d offer your tenants another year at the current $3375/month.  At the end of that second year they’ll probably want to go month-to-month while they negotiate their next set of orders with their service and figure out when they’re moving.Even if the market rents have gone up $330/month in your neighborhood, raising the rent on your tenants now could cost you a month’s vacancy if they decide to move.  (Military families know how to move, and they have friends with pickup trucks.)  Considering how easy they’ve been to have in your property, you could offer the second year as a one-year lease at the current price and tell them that you’ll have to consider raising the rent at the end of the second year.  You’d want to continue your regular checks of the property during their second year, and if they continue to be great tenants then I’d talk with them about their third year.  During that third year they could either sign another years’ lease (in case they think they’re extending their tour or leaving active duty) or you could talk about raising the rent by $100/month.  When they get your offer near the end of the second year, they’ll probably share their plans with you.We had military tenants who unexpectedly decided to retire during their second year.  We signed a third year’s lease at the same rent.  We raised the rent 5% during the fourth year (for a year’s lease) and again during the sixth year (for another year’s lease).  They finally moved back to the Mainland after eight years.  They were one of our best tenants ever.

Austin F. · Answer

I personally don't increase rent for good tenants.

If they're significantly below market possibly, but keeping good tenants and avoiding turnover costs is more valuable to me than an extra $100 a month.

Would you increase rent?!?

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