All Forum Posts by: Thomas Harris

Hi everyone, I would love some help with this. I have a tenant who still has 8 months left on his lease. He recently informed me that his mother has fallen ill and he needs to move to Texas to take care of her and he would appreciate if I could let him out of his lease early. I told him I understood and was willing to work with him, and told him to give me a written notice of his intention to move out. He emailed me one a few minutes ago that said he will be out by February 9, 2023. That's only a week away. In the state of Florida, I read that a tenant on a yearly lease must give no less than 60 day notice to move out, and is responsible for 60 days of rent. But I also read that the tenant is responsible for rent until a new tenant is found? Which is it?

How do I handle this? He has a $1200 security deposit...do I use that to cover the rent until a new tenant is found? The market has been very slow here for the past couple months, so I don't have much hope in finding a new tenant quickly.

Also, if somehow I rent this house before the 60 days are over, do I refund him the rent? Or prorate it? Hard to find info regarding that situation.

Any advice would be greatly appreciated!

3 Votes

Saint Petersburg, Florida

Quote from @John Myers:

Quote from @Thomas Harris:

Hi everyone, I know this question has been asked many times before, but I need to settle a disagreement with my wife so I am unfortunately asking it again. I apologize for the length of this post. Please bear with me. I am at my wits end.

My wife and I own a fourplex. It is fully rented and 3 of the 4 tenants have been there for several years. The other tenant has been there for 3.5 years. They are all paying $775 per month. Similar units in my area are going for $1,150 minimum. The average price seems to be $1,200 but there are a few posted once in awhile for $1,150. But for the past few months I have never seen a similar unit listed for less than $1,150.

My wife and I agreed that the rent is too low and we must raise it, but we do not agree on the price. I want to raise the rent to $1,000 and she wants to raise it to $950 or even $900. Her argument is that she does NOT a want to lose any of the tenants. My argument is that even though the increase is big, it is still $150 lower than what literally everyone else in a 100 mile radius is charging. She says I am being greedy and that if a recession were to happen, we would be lucky to get $300 rent for these units. I disagree.

All 4 tenants always pay the rent on time and take excellent care of the units, which is why I don’t want to raise to full market as I don’t really want them to leave.But my wife is terrified at the thought of any of them leaving to the point where she doesn’t want to raise it more than $950. She prefers we only raise the rent to $900.

We’ve had 3 vacancies in the last 3 months and we do all the cleaning, painting, and minor repairs ourselves. She says she is exhausted and doesn’t want to deal with another vacancy. I get that, I’m exhausted too. But it hasn’t been so bad. Our longest vacancy has been 6 days these past few months and it takes us about 2 weeks to get the unit back to the way it was before the tenant moved in. And it hasn’t been very hard finding highly qualified tenants to fill the vacancy either. I argue that with the increased income we could afford to hire someone to clean up the vacant units and do the work for us. She didn’t have much to say on that issue after that but she’s still fighting me hard on the price increase. She is convinced a recession is coming and says we we lose all of our tenants when that happens because everyone will be broke. So best keep the price low now so they won’t leave us later in a recession.

I am ready to give up at this point because I’ve tried so hard to get through to her. I’ve shown her all my research and just when I think she’s about to finally agree with me, she throws ‘recession’ in my face. So now I will go off to research how rentals fare during a recession.

But first, can anyone please tell me if raising the rent from $775 to $1,000 is a good idea or not? Am I being greedy? Or am I being foolish for not raising it even higher to be a bit closer to the $1,150 market rent? Is an excellent tenant worth missing out on $9,600 a year?

I had this same converstation with my wife. After talking about it, she was sort of convinced to raise the rent. I was all in for raising the rent on all of our houses. I raised the rent on every home I own, some homes we raised the rent by $400 per month. I did this in June of this year and not one tenant moved out. In fact three out of 9 of the tenants thanked me for not kicking them out. Here it is 4 months later and no one has moved out. Trust me when I say that renters are very knowledgable about the current rental market. They know if they are getting a good deal as they are always looking at what is available. I did provide 60 days notice of the rent increases in order to give them plenty of time to find new place. With all the rent increases, we are still about $200 under market on most homes. My tenants know they have a good deal. The rents range from $1600 to $2000 per month.

It is important to keep in mind that you are running a business. You need to constantly be looking at your top line revenue and all of your expenses.

I hope this helps and I recomment raising the rents to something just below market rents.

Thank you for sharing your personal experience, I found it very helpful. Going from $775 to $1,000 is big increase ($225) in my opinion but the fact that you raised your tenants almost double that and they all decided to stay gives me peace of mind. I agree with your logic. As long as the rent is still kept under market, there is no reason for the tenant to get upset over an increase as they will still be getting a good deal. Unless they can’t afford it, of course. But we’ll cross that bridge when/if we get to it.

Our tenants have been with us so long we honestly don’t know what their income situation is like now. Has it increased? Decreased? Do they have more expenses now than they did a few years ago? (Aside from the obvious rise in the general cost of living, of course)

We were thinking about asking each of our tenants what they can afford to pay, but that might not go over so well. My wife mentioned that people would rent for free if they could. While our fourplex tenants are all good, decent people, I doubt any of them would offer to pay more than $50 more for rent if they can avoid it.

0 Votes

Quote from @Sasha Fukuda:

I would agree with you. I think that raising rents to a little below market is fine. What are the tenants going to do? Go to all the trouble of moving out, just to go to a comparable property that's a little more expensive? Also, does your area not have a housing crisis? One of the last rentals i filled, i had to choose between two people who were both commuting an hour and a half to work because they couldn't find a place to rent in the area. Even if there was a recession, people still need somewhere to live, and there's not enough housing. I don't see any realistic scenario where rents drop suddenly and drastically. You could always tell your tenants you'll do $950 this year, and probably raise it another $50 next year.

Thank you for your input. I agree. There are costs associated with moving and the market is very competitive right now. I’ve heard there are even bidding wars in some places. Yikes!

I think maybe it does. Our last two tenants both work out of town, one about an hour drive and the other about an hour and a half drive. I was shocked at first that they would rather spend the gas money and long commute time everyday than just rent closer to their job, but one explained to me that the rent was much too expensive in the town their job is located in, and the other explained that the market was so competitive he had trouble finding a place, even though he is more than qualified.

Yeah. I’ve done a bit of research regarding what happens to rentals during an recession and it doesn’t seem nearly as bad as my wife was making it out to be.

0 Votes

Quote from @Alexander Szikla:

I have my tenants get used to modest increases - just so it never comes as a shock, but nothing too prohibitive. They might be slightly below market, but well worth avoiding turnover expense and vacancy.

Thank you for your input. This increase is a lot because we didn’t increase in the past except for one time. So we are playing ‘catch up’. It’s our fault for falling behind but on the upside we will make sure to never get this far behind again.

0 Votes

Quote from @Ron Brady:

@Thomas Harris It sounds like your wife has been talking to mine :)

I concur with your perspective about missing out on the financial upside of charging near-market rents at turns. I've also had many drawn-out "discussions" with my wife regarding both the right rent amounts and about communicating clearly and plainly with tenants around lease violation issues and late rent payments. My wife tends to argue for lower rents and less clear/more delayed communications with tenants for fear the tenants will stop paying rent, not renew, etc. While I am convinced that I am right--and luckily she does not read the BP forums so I will not get in trouble for sharing this with you--winning the argument and staying happily married are not always compatible.

A compromise we've stumbled into is that our portfolio is now made up of two types of homes, a) four by-the-rooms and b) three furnished medium-term rentals (30-120 days). My wife has given me full discretion to price the medium term rentals as there is already built-in regular turns and often these are traveling professionals whose employers are footing the bill, so my wife doesn't sweat taking company's money versus individuals. I then put less pressure on her about our by-the-room rental prices being below market.

In sum, you're right but I recommend that your happy marriage is more important than the added cash flow and to proceed accordingly.

Best wishes to you both.

Hi Ron, thank you for sharing your personal experience. My wife does the same things! We’ve waived many, many late fees for previous tenants in the past at her request. Let lease violations slide, and reminded tenants that the rent is past due every.single.month. If we didn’t remind them the rent was due, they probably wouldn’t pay. She is too easy on the tenants and I have to remind her that the lease is there for a reason. The tenants read it and signed it. We wouldn’t be cruel for enforcing it.

It’s gotten better over the years as our quality of tenants have improved but she still is overly sympathetic with them in my opinion. I like our tenants and care about them. They are all decent people who work hard and some have families to support. But at the same time so do we. Who helps us out? No one. I think charging fair rent is a good middle ground that will keep everyone happy.

Sounds like you have a great system. I actually would like to raise the rent a bit closer to market, but I settled for $1,000 as a compromise for her. That $150/month still hurts but it’s a lot better than losing $375/month.

I hear ya, buddy. Happy wife, happy life. We discussed this some more today and she agreed that I am not being unreasonable with my $1,000 price. She still worries a bit about losing a good tenant but we’ve gotten great tenants with our last 3 vacancies. She just needs to remember that. There are many nightmare tenants out there but many good ones as well. And if she’s burned out from all the turnovers, we’ll hire someone to do the work. I’m a bit burned out myself.

Best wishes to you and your wife!

1 Vote

Quote from @Richard F.:

Aloha,

Ask yourselves, are you running a business, or a charity? I have handled a number of properties where the owner wanted to "help out" students, or elderly, or a nice single mom, or whatever. Every one of those tenants stayed between 5 and 10 years, then went out and bought a brand new home, and in one case, a car too. And, every time, after move out, the Owner had to spend tens of thousands of dollars to update the home to achieve current market rates, in large part because the units were borderline to begin with, but the "needy" tenants settled for that somewhat tired look.

The key takeaway here is to put aside plenty of money in the interim so you can perform a complete update to start the next 20 years at the top of market. You will never maximize rent when you only update part of the unit...

Hello! I appreciate your two cents. You make a good point. We agree that we have been running somewhat of a charity these past 12 years and we are trying to change that, while still being fair to our tenants. She agrees my price is reasonable now, just still worried about being able to find good tenants in the off chance some choose to leave after the increase. I reminded her that we have found great tenants for our past 3 vacancies. Strong vetting is very important, as is fair pricing. She prefers long term tenants whereas I don’t as I feel the cleanup and reno is much worse as they’ve been living there for so long. Another settlement for another day!

0 Votes

Quote from @Bjorn Ahlblad:

@Thomas Harris welcome to BP! Raise it to whatever you want. And get some help! I have a handywoman who does painting, tile work, caulking, cleaning filters, some plumbing, all cleaning and more. We keep her as busy as we can and she loves it! Don't assume a 'handy person' has to be a guy!

Hi Bjorn, thank you! We would love a good handy person! Big companies just charge way too much.

0 Votes

Quote from @Edwin Park:

Compromise. If they're excellent tenants, raise it to $950 and then increase it 5% at every lease renewal without fail until it reaches market rates.

Good advice, thanks!

1 Vote

Quote from @William Anderson:

Sounds like you could raise the rents to market and hand this property over to a property manager. After paying the management fees you would still be ahead. The best part, your marriage would be better off. I almost always recommend against self-management. Leave the headaches to the professionals. Your situation is a perfect example of why not to self-manage.

Unless you are in the charity business which is ok, your property is a real business based on dollars and cents.

I hear ya. Thank you for the advice. We have looked into property managers in the past but they were charging too much. I feel that property managers are for landlords who don’t want to treat their business…like a business. My wife is very easy going with the tenants whereas I try to enforce the lease (violations, late fees etc) and I try to make decisions from a professional point of view, not personal. For example, not raising the rent so your tenant won’t leave seems like a poor business decision.

0 Votes

Quote from @Matthew McNeil:

Appreciate the concern for your wife's feeling regarding the matter. Lots of good feedback and advice already posted. My two cents: I've lost thousands of dollars in rental income during the first 10 years I've owned properties because I kept my rents low. My reasoning was that I didn't want to lose good tenants. 5 years ago I reversed my position and without attempting to take advantage of any tenant I felt that I needed to get my rents at least up to market value. During the past 12 months I've raised my rents an average of $350 per property, and not a single tenant balked.

Thank you for sharing your personal experience. It makes me not worry so much about our tenants leaving. I personally wouldn’t leave if my landlord raised my rent from $775 to $1,000 (though it is quite a jump) if I couldn’t find a cheaper place on the market, but everyone is different and some are on fixed incomes. Not to mention, we only raised the rent once all these years, and only $25.

Her opinion matters very much to me. I think the main issue is she is very worried about losing good tenants, which I’m trying to get her to see that it’s not something she should lose sleep over. I think because we have been burned so many times in the past by horrible tenants, she is holding onto these good tenants for dear life. But there are plenty of good tenants out there. We just always ended up with the bad ones because we didn’t do thorough screening or chose to settle to avoid long vacancy.

After talking to her some more she told me that she feels my $1,000 price is fair as it is a good $100+ cheaper than the competition. After we sat down and crunched numbers, she realized just how much we are losing by keeping our good tenants rent low (not just this year but the past several years) and I think that made her come around. She is still a bit worried they will leave but is starting to agree that even if they do leave, it’s not the end of the world.

1 Vote

All Forum Posts by: Thomas Harris

Thomas Harris has started 2 posts and replied 16 times.

Post: Tenant only gave 1 week notice to break lease?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?

Post: Should I raise the rent closer to market on good tenants?