All Forum Posts by: Kar Sun

I actually do not want to sign a new lease with him after his rudeness. My contracts do not have automatic extension because every year I have to update my contract and make sure I am covered.

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Quote from @Nathan Gesner:

Quote from @Kar Sun:

We need more numbers to better advise you. What is he currently paying? What's market rate?

If he's $500 below market, a $400 increase would be more than fair. I don't want a tenant - even the very best tenant - getting more than 10% below market.

Based on what you've told us, I suspect he's trying to intimidate you into giving him what he wants. I would just stop offering a renewal and terminate his lease. He can jump into the free market and see how far his dollar goes.

Thanks for your comment. You are 100% correct in your assessment. He is trying to intimidate me. He is currently paying $2100 and he is well off financially. Current market supports $2850 or more as I researched. There are no properties on the market similar to mine. Anything that comes on the market is rented within less than a month as I am following listings on multiple websites. None of the listings so far had the same amenities as mine (garage, pool, fitness, views, location, condition, premium appliances, w/d, dishwasher, walking trails). Most small landlords sold their properties as the market is allowing it. I asked for $2500. In my market there is lots of small corporate apartments for the astronomical prices and geared toward millennial crowd. In my market I am also not obligated to send any price increase letters. Tenant states that summer is a very busy season for him as he is frequently traveling and if he will sign it will be under duress. His contract ends end of summer. It is not my fault he is not looking at the information I send to him and not checking his contract. I really do not want him there anymore after this kind of talk. But in my letter I gave him until July 1st to respond.

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Quote from @John Underwood:

Quote from @Kar Sun:

Quote from @Roy Nash:

Quote from @John Underwood:

I would not do a $400 increase to a good tenant. I'd do maybe $75 to $100 at most in one year.

Agreed $400 is too shocking to the tenants. Our rents have gone up alot in my area in Washington. In some cases my Rents are $400 to $600 under Market even though I have been agressively raising them 10% a year (except duing Covid Eviction Moratorium where it was illegal in WA State). My raises were $75 to $150 max this year averaging about 11% and they just went out with 60 day notices which is alot to most of these people.

yes, it is shocking. so is the gas at the pump, the food and everything else. The market supports my rent increase. I cannot subsidize the tenant. My property is not exactly the "affordable" kind. I will rent it fast if I put it on the market. $400 is not that much for this tenant. He is qualified financially to have it. He just does not want to. I was not trying to get rid of him. But it is doing a serious disservice to self for all my hard work by not raising the rent when the market is screaming for it. All good things come to an end and him paying well under market was a good thing that needs to come to an end. I have gotten more experienced and wiser. And I won't cry if he has to go. In fact, after his mean words I would prefer it. I am in southeast by the way. so thank God I never had to deal with any moratoriums and I am not planning to by carefully selecting tenants.

Look at it from the tenants perspective. They are dealing with higher gas and food and now you are kicking them while they are down. This is not the kind of person I am. I refuse to focus on just the market rent aspect. These are people you are affecting. Just because you can doesn't mean you should. Is this how you would want someone to treat you? I am in the business of taking care of my properties and my tenants.

You were likely already cash flowing on a fixed rate mortgage so your payments have not gone up. It is your fault that you haven't gradually increased the rents every year but you are ok with a shocking price increase to fix your own mistake? Again I am not that person. I don't blame the tenant for being upset. I think if you were in his shoes and are being honest you'd be upset too.

It is my fault that I was being nice. This tenant has the ability to pay $400 extra. I know that because he make as much money as the value of my condo. He just does not want to pay. I did the 3 % raises twice and 0 raises post covid. However the rent went astronomical at the start of this year. From now on I will include the rent raise in my contract.

1 Vote

Quote from @Eric James:

This is why property management isn't for a lot of people. Getting emotionally invested in the situation, caring what a tenant feels, texting with tenant, etc. Rather than treating this as a business. You notify tenant if you decide to increase rent. Tenant leaves or pays higher rent. That's it. Nothing else matters.

Thanks for your comment. I was doing extra things for this tenant like allowing him to text me. It will change. And I am not that emotional I just wanted to see what other are doing. I am a small time investor and hiring a PO, even a good one, is not an option for me.

1 Vote

Quote from @Roy Nash:

Quote from @John Underwood:

I would not do a $400 increase to a good tenant. I'd do maybe $75 to $100 at most in one year.

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Quote from @Rodney Sums:

Quote from @Kar Sun:

I have a tenant that pays on time and keeps place clean.

I also offer him a desirable place to live that is being taken care of.

To me nice tenant is not the one who expects me to subsidize their rent.

I provide a service and a roof and that is why I have responsible tenants that I chose to have a professional relationship with.

The place has lot of very desirable amenities and has a great location..

He has been with me for 3 years and I have only raised rent $125 in all these years and last year there was no rate increase.

However, things have changed.

I have expenses, taxes and other costs that must be covered as otherwise I will be in negative..

Also, there is a lot of demand.

I sent a very nice letter to a tenant stating the data and a comparison rate with the market properties.

In my market rental properties went up 124%.

The hike is $400.

Small apartments in my area go for the same as my discounted rate for him.

But the place is spacious and is a townhouse.

He is highly unhappy.

He calls it is a money grab.

He is saying that he is under duress if he decides to stay as summer is a busy season for him.

Well, the contract ends end of summer and the rate increase letter went out prior to that.

There is no rent control in my state.

And in my state I do not even have to send rent increase letters.

This tenant makes 300K in income.

I have been nice responding to his texts but it makes me think if I actually want to keep dealing with him.

He states that my property is not worth the increase.

Well, my property is in such a location and condition that it is difficult to find anything similar.

It is also a business.

Any one wants to share a relevant experience?

Please do not bother to send me points on how to write letters to tenants; mine was very much to a point with all the data, comparison photos, prices....

I just think if as a business person himself he does not value my business why should I renew the contract especially now he says he is under duress.

Renters enjoy not being responsible for maintenance. The same tenant that gripes about rent increases is the same tenant that will DEMAND you fix things when they break. If it's serious enough they'll demand hotel stays and not at no Budget Inn either.

That $4800/yr he's mad about can be wiped out if you need a new HVAC.

He won't be like "oh yea he didn't raise my rent $400 when he could have. Nevermind the a/c I'll just turn up the ceiling fan"

Neither of you is a bad person. It's just business. And you know this, mannnnn.

Thank you. Agreed. And I had to put a new AC unit recently. I got a great deal on it.

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Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Branden Yang:

Quote from @Kar Sun:

Quote from @Branden Yang:

Why are you basing your investments on other people? Unless your property is bad, I would just raise it twice if he complains. Go get a property manager or something because I don't know why you have a single-unit building. You could probably get a 4-8plex with the money you could get from your townhouse.

My goal is to get a passive income I can accept with a low maintenance property and low maintenance tenant. I have no plants to sell the property and will most likely keep it in the family. It is not my goal to upset the tenant and to raise it so high that it is out of reach. He is financially able to afford it plus the market demands it. I discounted my rate since he is a long term tenant. I am also a small time investor. I do not think I can do more units at this point and I am good with that decision. I am a first generation American and started out pretty late with investing. But better late than never. I also have a full time job.

Well, if you can find another low maintenance property that cashflows more, would you sell it? Getting a low maintenance tenant is also good, but unless your income is 1.5x or 2x your expenses, I recommend getting more properties, but with higher unit counts. If you got a good property manager, you wouldn't worry about the property, instead you can just retire easily. If you have a full-time job, just spend an hour or two finding deals. I'll find you one if you want to be a partner.

No, I would not sell the property. It has doubled in value and there is no way I can find something like this now. If I had to buy now my rent would be very high. The property cash flows but I need to bring it to market and I have some expenses for this property that need to be covered.

All the more reason to sell. Your property is bleeding money with every dollar increase in property value (and thus equity). As your equity increases in "face value", it decreases in "actual value"...and loses potential cash flow by not maximizing the buying power of your equity.

Thanks for the advice. At this time I have no plans to sell. The property is in a great location, great shape, updated, low maintenance and near my residence. Too many pluses. It is am A class property. It does cash flow and I can use it to acquire more RE since I have the equity in it. I prefer to use the other people money and not worried about debt on the invested properties.

Ha - ha. OK. Everything you just said right now is all the more reason to sell, but it appears as though you are emotionally attached to the property, and for some reason you are mistaking where the value of a deal is found...and it isn't the property.
You say you "prefer other people's money...", and yet keeping the property is actually doing the exact opposite.

The property is mortgaged. So it is not my money that I put in it. Tenant pays all expenses and it also cash flows. I do not use my money. I use bank's money. But you are right that I am emotionally attached. I love the property. And it is performing. After doing lots of research on line I can say it is a rare gem. Top shape, location and is within 2 miles from my residence. Many investors would be coveting something like this. And I actually have a few like this. I consider myself lucky and assertive enough to have gotten them. It all started as educated guesses without having actual investor's knowledge.

Current

IRR=27.3%

Cash on cash =4,495%

Cap rate = 7.34%

Equity is your money that you are not accessing. It is the price you are paying for the property.

Example: $100k property; 20% DP = $20k = $20k in equity at purchase...meaning for every dollar in equity you have $5 in PV
1 - PV increases to $120k; equity increases to $40k; ratio of PV to Equity is 3 to 1...meaning for every dollar in equity you have $3 in PV
2 - PV increases to $160k; equity increases to $80k; ratio of PV to Equity = 2 to 1...meaning for every dollar in equity you have $2 in PV
Same example but instead of keeping the property you sell it at the 2 timelines above...
3 - Sell at $120k; $40k in equity is now cash and moves forward as DP on new property based on 20% DP (back to a 5 to 1 Ratio); New PV = $200k...$80k higher than if not sold.
4 - Sell at $160k; $80k in equity is now cash and moves forward as DP on new property based on 20% DP (back to a 5 to 1 Ratio); New PV = $400k...$320k higher than if not sold.
Same example, but selling properties every time there is a doubling of the original equity at purchase...
6 - Sell at $120k; $40k in equity is now cash and moves forward as DP on new property based on 20% DP (back to a 5 to 1 Ratio); New PV = $200k...$80k higher than if not sold.
7 - PV from #6 increases to $240k (which also doubles the original equity at purchase of $40k to $80k) Sell at $240k; $80k in equity is now cash and moves forward as DP on new property based on 20% DP (back to a 5 to 1 Ratio); New PV = $400k...$320k higher than if not sold.
Now, if you had a total PV of $400k, instead of $120k, how much more CF do you think you would have?...even if the CF was less per $1000k of PV than your first property?

Thanks you for the numbers and I will look at them tomorrow as my head does not work well now.

One problem with selling is that at the current rate of inflation cash loses its power fast and I am not ready to purchase another property at this time. Being an investor is just something more "fun" and part time. It is still a business but I work full time and cannot spend all my time on the properties. I also like to keep my stress levels down.

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Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Branden Yang:

Quote from @Kar Sun:

Quote from @Branden Yang:

Current

IRR=27.3%

Cash on cash =4,495%

Cap rate = 7.34%

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Quote from @Henry T.:

I had one for 15 years. Fantastic tenant and person. But property taxes became so out of control I had to do a significant raise. I still kept her under market, only a little. It was a 22 percent raise. She immediately sent notice that she would be leaving. Her grown kids were still living there, one with baby. I think she took it as an opportunity to say bye to her kids, and for them to get it together. I accepted the possiblility that she would leave, giving me the opportunity to do a much needed rehab. After the rehab I was able to increase the rent 75 percent. Even though the place looked like crap and there was some damage, and she made no effort to clean, I didn't hesitate to return the damage deposit in full. I hated to do that increase on her, but I had no choice. I could not take these increases any longer and do nothing. Like someone said, If I had often raised by a little, consistantly, maybe she'd still be there. But 15 years of no paint, old carpet, etc, is not good. But it all worked out for the best in my case. And really, I think it was an excuse that helped her get out of her kids bumming off of her. All None of my business of course, but I hope she's doing well. I don't know if this info helps. I'm more strictly business these days. These were the days when your lease was one page, and you were able to have an understanding with your tenant. I think today is awful. Tenants unions and city councils are all about how to screw your landlord, and my 30 page lease reflects all of that nonsense. I miss those old days before "just cause', there's nothing "just" about it if you're the owner. Protect yourself. Raise regularly. Don't explain or give any info that can be used against you. Today it's Shut up and do your job.

Thank you. Good perspective. If the raise is due I will do it without hesitation. I am not worried about vacancies as there are no plans to sell. Next time I will learn that in a market that demands it I should raise at least 5% and I should set up the expectation with the tenant at the start. I probably did not do it well. A reward for a "good tenant" is not subsidizing his rent. A reward is when I renew their contract. "Good tenant" is simply the one that follows the agreed upon contract. I do not know where the people got the idea that tenant that pays on time is extra special. They are just following the contract. BTW my place is in a top shape. I update it regularly.

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Quote from @Joe Villeneuve:

Quote from @Kar Sun:

Quote from @Branden Yang:

Quote from @Kar Sun:

Quote from @Branden Yang:

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All Forum Posts by: Kar Sun

Kar Sun has started 20 posts and replied 364 times.

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase

Post: Tenant is unhappy with the rent increase