Evaluating Current Rent Against Market Rent

In the five years we’ve been landlording, market rents have not changed in our area. When most people re-rent their units, the rent price doesn’t change; only the deposit amount changes to what the market will currently bear.

I think that may be changing. Last week there was only one vacant unit advertised on Craigslist in our target rental neighborhood. There’s isn’t much for applicants to choose from. Some suits are advertising for $25 or more per month. The FOR RENT forum for our county on Facebook is full of tenants ranting about landlords charging too much.

Last weekend I did an annual review of market rents for our current tenants, and reevaluating the water sewer garbage pass through amounts we charge. To do this, I got through the same calculation I go through when we have vacancies - how much similar units rent for on average, what rent is per square footage in the area, what amenities our units have compared to others, and what properties within a few blocks are renting for.

The water sewer garbage was easy – one tenant is using really low amounts of water (if it continues we will refund and lower rent), one tenant is using really high amounts of water (we sent her a letter informing her rent would go up in September if it didn’t reduce to normal levels), and everyone else is pretty close.

I think we could be charging $60 more per month on our best unit, the 3/2 duplex. We’re going to monitor it awhile longer, since one tenant has not yet lived there for one year and we don’t raise rent in the first year. But this fall we might raise rent $30/month, splitting the difference.

Our 3/1 house appears to be $20/month under market rent, but they also have not yet lived there a year. I’m not sure it’s worth the hassle to raise rent $10/month. Two other units are about $10 under market rent, and three are right at market rent.

And so we wait and watch, but with more hope for an upside than in the past.