Raising Rent to Fair Market Value

[Jenny Bayon]

Hello! I recently became a property manager for single-family homes that have not had rents increased in over a decade and were low to begin with. My father-in-law is the owner and wants the rents raised, but is leaving the amount and method up to me. Several of the tenants are long-term tenants. Rates are currently $700-900 below market value (Gasp!). None of the properties are under rent control. What the best way to get these rents to market value without losing our long-term tenants or giving them a heart attack? Thanks in advance for your thoughts and ideas!

P.S. We live in Del Norte County, CA and the housing market is extremely tight. 

[Ken Dunn]

I definitely concur with @Joe Splitrock. Great advice. 

I will often print/include the most current Zillow “Zestimate” showing what your particular property address could rent for, according to Zillow. To soften the blow, you could even print a recent article that explains why rents across the country (or your particular area) are increasing at such a high rate.

This gives you 3rd party verification and shows you are not just pulling numbers out of thin air.

I imagine the tenants will not be surprised, and will likely be wondering what took so long for the rents to increase over the years.

I read a recent news article about a lady in Plano, TX that got an increase notice of $750…yes $750 on top of existing rent rate. She has lived in the house for 3 years with no increases and is on a month to month lease.

If any tenants do decide to move out (not likely since, based on your last post, they will still be a few hundred dollars below market rent) that is a great time to do some renovations and raise rent even more.

Hope this helps.

Ken