Market Rent Increases... Finally!

This week we sent out letters to four tenants adjusting their rent.

This is the first time we’ve raised rent since we started investing in 2010. Market rents in our low income area have not budged in all that time; they were often lower than what we were charging. Which is depressing for an investor, but we carry on. The investments made sense at the rent levels of 2010 and we were not counting on any appreciation of any kind.

This year is different. We are getting calls all the time from applicants looking for places. There is very low supply. Some of the rents listed in Craigslist are crazy.

With half of our properties with the property manager, we only had three property types to analyze:

2 Bedroom, 1 bath Duplex: 475 current rent, 550 market rent, 65 difference

3 Bedroom, 1 bath, no garage: 725 current rent, 830 market rent, 105 difference

3 bedroom, 2 bath, garage: 755 current rent, 880 market rent, 125 difference

Looking in our procedure manual, our philosophy is to split the difference 50% and raise rent by that amount. But after years of not adjusting rent, we just couldn’t do that. We discussed some different options and decided to raise rent 25% of the difference this year, and work our way up to 50%. We want to retain our tenants, and see if this higher rent trend is long term or not.

I logged on to our state landlording association and found a nice non nonsense rent increase memo, and we sent them out, with plenty of notice; the rent increases for March 1st. I feel compelled to share what market rent is, what the comps are, etc., but I think the less information the better.