Are you planning on increasing your tenants rents in 2024?
Alan AsriantsBusiness Member
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
Alan Asriants - New Century Real Estate 591 Reviews
Are you planning on increasing your tenants rents in 2024?
Most Popular Reply
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
2yI will likely leave mine the same this year - I'd like to avoid the vacancy. If I have a tenant move out, then I'll increase the rent by $25 or so for the MFH and $100 or so for the SFHs and re-market it.
But I try to keep the tenants in as much as I can even if it means keeping the rent the same for 2 years. By the 3rd year they will be seeing an increase though
I've actually been debating lately on giving $100 or so off first months rent on my affordable units as a way to fill them faster.
For example on my fourplex the units rent for $650 each - the PITI is $909. So a month of vacancy costs me $650, so a week of vacancy costs me $162.50. So if I offer $100-150 off first months rent and get someone in there sooner, it actually saves me. I might do this for a release too come to think of it...
23 Replies
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes2y
I set rent based on the market, not based on my costs (although they are related). We are still increasing to catch up to the large market increases during 2021 and 2022. Stim-flation.
- Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes2y
Quote from @Mike Dymski:
I set rent based on the market, not based on my costs. We are still increasing to catch up to the massive market increases during 2021 and 2022.
I operate the same as Mike. I also work in multifamily - most operators set a minimum increase of 2-3% regardless of what market rent is. The increase is higher if market rent is further above existing rent.
- 2yMelanie ThomasBusiness MemberReal Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 490 votes
We raise the rent annually in response to the escalating costs of various expenses. We, of course, perform market analyses to ensure that we are not pushing the boundaries too far, and so far, we haven't encountered much resistance. Good luck & happy investing!
RentWerx Property Management4.73308 Reviews - Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Reed Rickenbach:
Quote from @Mike Dymski:
I set rent based on the market, not based on my costs. We are still increasing to catch up to the massive market increases during 2021 and 2022.
I operate the same as Mike. I also work in multifamily - most operators set a minimum increase of 2-3% regardless of what market rent is. The increase is higher if market rent is further above existing rent.
Thanks for your input. What if the increased rent is not attainable in current market conditions?
Say you increased rents and tenants left and now you can't get it rented at that rate anymore?
Alan Asriants - New Century Real Estate 591 Reviews - Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes2y
Quote from @Alan Asriants:
Quote from @Reed Rickenbach:
Quote from @Mike Dymski:
I set rent based on the market, not based on my costs. We are still increasing to catch up to the massive market increases during 2021 and 2022.
I operate the same as Mike. I also work in multifamily - most operators set a minimum increase of 2-3% regardless of what market rent is. The increase is higher if market rent is further above existing rent.
Thanks for your input. What if the increased rent is not attainable in current market conditions?
Say you increased rents and tenants left and now you can't get it rented at that rate anymore?
2-3% increase regardless. On a one-off basis, if a tenant would like to negotiate, they can. If you can't re-lease the unit at that rent, you'll get a negative trade-out. It's a risk that owners are willing to take to move the rent roll forward.
- 2yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Alan Asriants On 3 of my 7 properties I am switching rent increases for new heating systems that will have the tenants paying for their own heat. While this was an initial outlay of capital for me in a little less than. 2 years I will have made my costs back based on saving the cost of heating oil at all 3 locations. Actually after depreciation at the end of tax time in the end of the second year I will have made out big time.
2 properties will not get increases and the last 2 properties will get rent increases because they are very far under market rates.
- Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes2y
I will likely leave mine the same this year - I'd like to avoid the vacancy. If I have a tenant move out, then I'll increase the rent by $25 or so for the MFH and $100 or so for the SFHs and re-market it.
But I try to keep the tenants in as much as I can even if it means keeping the rent the same for 2 years. By the 3rd year they will be seeing an increase though
I've actually been debating lately on giving $100 or so off first months rent on my affordable units as a way to fill them faster.
For example on my fourplex the units rent for $650 each - the PITI is $909. So a month of vacancy costs me $650, so a week of vacancy costs me $162.50. So if I offer $100-150 off first months rent and get someone in there sooner, it actually saves me. I might do this for a release too come to think of it...
- Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes2y
We watch the local markets carefully and are increasing at least $50/month for renewing SFH this year. If I had any tenants I didn't want to keep I'd raise rents by $150.
For places that rent at or around $2000 we feel increases of more than $50/month creates a risk of turnover. I consider the risk of 1-2 months vacancy not worth the extra $600/year.
For our excellent tenants, we've increased rents by about $40-60/mo if sub $1800 in our sunbelt markets. If it's over $1800, we've increased $50-75/mo. If it's the houses that are over $2500, we're up by about $90-110/mo. This is all with one's that expirings by Feb 2024 EOM.
For our tenants we're trying to get to leave, we have and we will just do an on-site inspection then a day later tell them we do not want them and give them legal required notice. We have placed all on market at about 5-8% higher than previously, and already have about 75% filled in under 20 days. The other 25% I expect locked up in next 2 weeks.
Our next batch of lease renewals are April. And have a ton in June-Sep. We will do the same for the April one's and are approaching tenants after MLK day for renewals, and then the one's we don't want we're doing an inspection closer to Prez day and issuing right after.
Anyone that moves over $25/mo was moving anyway. Can you imagine taking a day or two off from work to search for a new home and do the moving. Then all the utility changeovers, new security deposit, cleaning and so on to save $25/mo, $300/yr?
Once I increased rent only $50/mo but that was some time ago. $100-$200/mo increase is the plan. (5-10% give or take.)
I will be raising rents between $50/month and $350/month. None of the increases will be to a rate above market rent because I currently do not have any tenants that I am trying to get rid of.
Market rents are based on various criteria. One criteria is risk level. The various policies continuously increase risk which results in significant rent increase.
There are some who he blame the LL. Their ignorance of economics is astounding. I benefit from their ignorance (my rents will increase ~$50k this year), but would prefer that they had a better understanding of consequences.@Alan Asriants hopefully this is a useful example of how to manage rents:
For many years, I either didn't raise rents, or the raises I did were minimal. Today, my rents are a deal for tenants, which means I get tons of applications, and I'm able to choose the highest quality tenants. Most of my tenants are upper middle class, 700+ credit scores, have graduate degrees, and are very professional (which makes my life much easier, and saves me lots of time--which saves me money). My properties are all A and B grade, so the tenants are usually very satisfied with the quality of product, and most of them recognize that they're getting a deal. In fact, the tenants are so happy, it's not uncommon for them to send me Christmas cards, and some tenants have even baked cookies for me! I've had tenants from both ends of the spectrum, though--and I can say from experience that happy, highly-qualified tenants make property management 100x easier.
Now that I'm firmly at the bottom end of the rent market, with highly satisfied tenants (who are unlikely to leave), I plan to begin yearly rent increases going forward, starting this year.
My target is 2.5%-5% rent increases every year for at least the next five years for renewing tenants. When there's a tenant turnover, I'll attempt a 7.5% or even a 10% increase, and see how the market responds (if I get crickets, I'll lower the price).
Even with those increases, my rents should remain at, or below market rates (because I'm currently well below market). Because my rents will remain at, or below market (even with the increases), and because my existing tenants are highly satisfied, I'm hopeful that the rent increases won't cause any tenant turnover...time will tell...
One problem I may encounter is that rents in the broader market are currently pretty flat, so even though I'm currently below market, there may be a ceiling to how far I can increase. However, with regard to the flat rent market, I have a few things working in my favor:
1. Most of the data we see about rents being flat is based on multi fam properties (particularly super high end A+++ units--some of which are even seeing rent deflation). My properties are single fam and small multi fam, and the type of tenant I rent to is quite different than the type of tenant who rents the multi fam units that currently have flat/deflating rents. I'm usually not competing for the same customer as the large multi fam properties, and so my rent market dynamics are different (and hopefully more amendable to rent increases). This is an example of why it's so important to understand one's customer and one's specific rent market niche. The rent market is not a singular market; instead, it is comprised of many submarkets with different customers, different property types, and different dynamics--and thus, different capacities for rent increases. Obviously, a single fam B grade 3 br 2 ba house is completely different than an A+ luxury apartment, and rent increases may look completely different at each of those properties (even if they're in the same neighborhood).
2. There is a severe shortage of single fam rentals in the neighborhoods where I own single fam rentals. I'm hopeful that simple supply & demand will allow for moderate rent increases for at least the next 2-4 years.
3. Even though rents are flat or deflating for many properties in many markets (esp. high-end large multi fam), nothing lasts forever--and eventually the market dynamics will change. I'm in a spot where I can wait it out--if I'm affected by the broader market and my own rents have to go flat for several years, it's not the end of the world for me. That's the value of using conservative financial models--you don't overextend yourself, which allows you to weather storms (or flat rent periods).
Having said all that, do I know for sure that all these things will pan out as I expect? No, I can't predict the future (nobody can). In fact, I'll probably be wrong about a lot of it, and unexpected factors will inevitably enter into the mix. But, I'll do my best to be prepared for unexpected setbacks, and I'll try to keep my operation flexible to changing market dynamics while making sure that each property is fulfilling its highest and best use...it will be interesting to see how it all unfolds...
Hopefully that's useful info.
Good luck out there!
- Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Alecia Loveless:
@Alan Asriants On 3 of my 7 properties I am switching rent increases for new heating systems that will have the tenants paying for their own heat. While this was an initial outlay of capital for me in a little less than. 2 years I will have made my costs back based on saving the cost of heating oil at all 3 locations. Actually after depreciation at the end of tax time in the end of the second year I will have made out big time.
2 properties will not get increases and the last 2 properties will get rent increases because they are very far under market rates.
Any upgrades - especially large capital expenditures are justified by rent increases since you are improving their living situation.
Alan Asriants - New Century Real Estate 591 Reviews - Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Jeremy Horton:
I will likely leave mine the same this year - I'd like to avoid the vacancy. If I have a tenant move out, then I'll increase the rent by $25 or so for the MFH and $100 or so for the SFHs and re-market it.
But I try to keep the tenants in as much as I can even if it means keeping the rent the same for 2 years. By the 3rd year they will be seeing an increase though
I've actually been debating lately on giving $100 or so off first months rent on my affordable units as a way to fill them faster.
For example on my fourplex the units rent for $650 each - the PITI is $909. So a month of vacancy costs me $650, so a week of vacancy costs me $162.50. So if I offer $100-150 off first months rent and get someone in there sooner, it actually saves me. I might do this for a release too come to think of it...
Makes sense, a lot of people don't understand the value of filling a vacancy earlier.
Even making 100 less a month but getting it rented a month earlier to a solid tenant is more worth it than waiting an extra month.
Math - Rent is 1500/m
You have a solid applicant ready to rent for $1400
If you wait another month you will lose $1500.
Renting it today at $1400, saves you $300
Again, the rental amount is an important factor here
Alan Asriants - New Century Real Estate 591 Reviews - Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Glen Wiley:
We watch the local markets carefully and are increasing at least $50/month for renewing SFH this year. If I had any tenants I didn't want to keep I'd raise rents by $150.
For places that rent at or around $2000 we feel increases of more than $50/month creates a risk of turnover. I consider the risk of 1-2 months vacancy not worth the extra $600/year.
Did that with one of my tenants this past year after having a headache tenant. increased by $100, and they left. Good decision even though i have been vacant for 1.5 months
Alan Asriants - New Century Real Estate 591 Reviews - Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes2y
Quote from @Leo R.:
@Alan Asriants hopefully this is a useful example of how to manage rents:
For many years, I either didn't raise rents, or the raises I did were minimal. Today, my rents are a deal for tenants, which means I get tons of applications, and I'm able to choose the highest quality tenants. Most of my tenants are upper middle class, 700+ credit scores, have graduate degrees, and are very professional (which makes my life much easier, and saves me lots of time--which saves me money). My properties are all A and B grade, so the tenants are usually very satisfied with the quality of product, and most of them recognize that they're getting a deal. In fact, the tenants are so happy, it's not uncommon for them to send me Christmas cards, and some tenants have even baked cookies for me! I've had tenants from both ends of the spectrum, though--and I can say from experience that happy, highly-qualified tenants make property management 100x easier.
Now that I'm firmly at the bottom end of the rent market, with highly satisfied tenants (who are unlikely to leave), I plan to begin yearly rent increases going forward, starting this year.
My target is 2.5%-5% rent increases every year for at least the next five years for renewing tenants. When there's a tenant turnover, I'll attempt a 7.5% or even a 10% increase, and see how the market responds (if I get crickets, I'll lower the price).
Even with those increases, my rents should remain at, or below market rates (because I'm currently well below market). Because my rents will remain at, or below market (even with the increases), and because my existing tenants are highly satisfied, I'm hopeful that the rent increases won't cause any tenant turnover...time will tell...
One problem I may encounter is that rents in the broader market are currently pretty flat, so even though I'm currently below market, there may be a ceiling to how far I can increase. However, with regard to the flat rent market, I have a few things working in my favor:
1. Most of the data we see about rents being flat is based on multi fam properties (particularly super high end A+++ units--some of which are even seeing rent deflation). My properties are single fam and small multi fam, and the type of tenant I rent to is quite different than the type of tenant who rents the multi fam units that currently have flat/deflating rents. I'm usually not competing for the same customer as the large multi fam properties, and so my rent market dynamics are different (and hopefully more amendable to rent increases). This is an example of why it's so important to understand one's customer and one's specific rent market niche. The rent market is not a singular market; instead, it is comprised of many submarkets with different customers, different property types, and different dynamics--and thus, different capacities for rent increases. Obviously, a single fam B grade 3 br 2 ba house is completely different than an A+ luxury apartment, and rent increases may look completely different at each of those properties (even if they're in the same neighborhood).
2. There is a severe shortage of single fam rentals in the neighborhoods where I own single fam rentals. I'm hopeful that simple supply & demand will allow for moderate rent increases for at least the next 2-4 years.
3. Even though rents are flat or deflating for many properties in many markets (esp. high-end large multi fam), nothing lasts forever--and eventually the market dynamics will change. I'm in a spot where I can wait it out--if I'm affected by the broader market and my own rents have to go flat for several years, it's not the end of the world for me. That's the value of using conservative financial models--you don't overextend yourself, which allows you to weather storms (or flat rent periods).
Having said all that, do I know for sure that all these things will pan out as I expect? No, I can't predict the future (nobody can). In fact, I'll probably be wrong about a lot of it, and unexpected factors will inevitably enter into the mix. But, I'll do my best to be prepared for unexpected setbacks, and I'll try to keep my operation flexible to changing market dynamics while making sure that each property is fulfilling its highest and best use...it will be interesting to see how it all unfolds...
Hopefully that's useful info.
Good luck out there!
great info. I am certainly one to use conservative metrics as well and I believe that getting a bit less for a quality tenant is always the move!
Alan Asriants - New Century Real Estate 591 Reviews - Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes2y
For long-term valued tenants, we will look at market rents and if we're low, we'll raise it to cover increased expenses, slightly more if rents have increased drastically. Even if they are upset, once they look around and see we're still below similar homes, they choose to stay. If not, we turn over and then fill at current full market rent. I'm a bit shocked at how high insurance, real estate taxes, cost of repairs, etc., have risen in the last several years. We won't raise on renewals unless the market supports it.
- Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes2y
Because I buy properties in desirable areas where people actually want to live vs “cheap” locations, I typically raise rents around $200.00 month every year to keep up with market rates. I don’t worry about tenants getting upset and leaving because I have a waiting list of potential tenant’s. Another reason why for me cheap properties are no bargain.
Quote from @Eric Gerakos:
Because I buy properties in desirable areas where people actually want to live vs “cheap” locations, I typically raise rents around $200.00 month every year to keep up with market rates. I don’t worry about tenants getting upset and leaving because I have a waiting list of potential tenant’s. Another reason why for me cheap properties are no bargain.
Cheap properties are pencil properties. They fit the math these people love to see, but they detract from the behavior they want to keep. It's almost 100% inverse.
- 2yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Riase when the market shows it makes sense
Logical Property Management4.9455 Reviews - 2yDominic RosatoBusiness MemberReal Estate Agent · Jersey City, NJ · Member since 2022 · 82 posts · 61 votes
I was once given great advice by a mentor - ALWAYS raise the rent. Even if just $25 /mo, you want to set a precedent that you raise rent every year. If your tenants are expecting an increase, then they won't be nearly as upset when they receive one.
@Bill B. is correct above me, if someone moves based off $25 /mo increase, they were moving anyways.
Dominic Rosato529 Reviews - 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
You don't mention what your rents are. $50 could be a large or small increase. I will increase my rents about 3%. They are in areas with rent caps and therefore under market value.
You asked what happens if the rent is not sustainable. If you are increasing above market value, then you should not have done the increase. If you are increasing to market value, the chance of a tenant moving over a 2-3% increase is slim. They know what the market rate is and the hassle of moving over $25-50 a month isn't worth it.
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