BiggerPockets


Raise Rent Letter

Forum Powered By:

47 posts by 30 users

To participate in forum discussions, create a free account or login.

John C

Real Estate Investor from SouthCentral, Iowa

Apr 05 '11, 12:11 AM


What is the best and most polite way to word this letter to get the rent and keep the tenant??



J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Apr 05 '11, 12:35 AM
7 votes


Why are you raising rent? Is it currently below market?

If so, say that in your letter. Let your tenants know that rents in the area for similar properties are higher than what you are charging, and based on the expenses you incur to keep the property in great shape, you need to increase the rent to market levels.

Of course, also throw in how great they are as tenants, how much you appreciate them, and any concessions you're willing to make in order to retain them (for example, if they've been there for a year, offer to paint a room for them or put a nice fan in the master bedroom; if they've been there for several years, perhaps offer to replace the carpeting in a couple rooms; etc).

Remember, it's MUCH cheaper to keep existing tenants -- even if you're getting a bit below market rents or have to provide incentives -- than it is to replace tenants.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Chad Pierce

SFR Investor from Powell, Ohio

Apr 05 '11, 11:19 AM


I just sent out a round of these letters to my tenants the other night. I made sure to thank them for being such good tenants. I explained to them that the rent increase was necessary to help offset the increases in my property taxes and insurance. I also gave them 60 days before it would take effect. Around 90% of my tenants are multi year tenants so I am pretty confident that no one is going to leave.



George P.

Real Estate Investor from Baltimore, Maryland

Apr 05 '11, 10:22 PM


If you only have a handful of tenants, why not call them to discuss? Sending a letter is very impersonal (IMO), even if you sugarcoat it. After all, it will sound like "you're a good resident, here is the rent increase, eat it".
Tell them it's inevitable and ask how much of an increase they can handle. They will give you the number they're comfortable with.



Maryann L.

Real Estate Investor from Methuen, Massachusetts

Apr 05 '11, 10:24 PM
8 votes


John, my lease states there is a 3% raise in rent when the renewal come around.

Here's what I did. I wrote each tenant a letter stating due to the economy we have decided NOT to raise the rent a full 3% and that only a 1.75% rent raise will occur. I gave them the new amount and told them when they could expect to pay it.

I then gave them a choice of $75 gift certificate to one of three local places

1) grocery place
2) walmart
3) restaurant

They were to check the place they wanted to recieve the gift certificate and notified that upon renewal the certificate would be sent. They needed to sign the form, date it with their choice of gift and return it to me in a self addressed stamped envelope.

NOW - I have their signatures on file that they understand the new amount they have to pay and when it starts and they feel GREAT because they got a renewal gift.

I've only utilized this method once, but it worked GREAT. I LiTERALLY just sent rewewals out for two units yesterday. I'll let you know how it goes.



John C

Real Estate Investor from SouthCentral, Iowa

Apr 05 '11, 11:48 PM


I only wish to raise rent on a coulpe of tenants that have been there forever, one was in the house when I bought it and when I tried once to raise rent threatened to move out so I relented. Now I think that its a landlords market and I could prob raise it. He is only paying $350 a month and I think $425 is what I would ask for a new tenant. I would prob only raise it $25 a month for now. Other tenant is 3 year tenant with the best early pay record and I havent been called for a repair in that time. She is paying $400 and a $25 dollar raise still seems cheap.. My wife says not to mess with it but I feel its my job to do so!!! Still deciding



Silvio Brigliadoro

SFR Investor from Riverside, California

Apr 06 '11, 12:13 AM
1 vote


I like that gift card idea smitnlit! I make sure to thank my tenants every chance I get for keeping the houses looking nice, I also make it a point to raise rents once a year, even if its only $5; I also send them a list of comparable rents in the area so they see they are getting a great deal.



David Beard

Real Estate Investor from Cincinnati, Ohio

Apr 06 '11, 12:26 AM
1 vote


John -- you've got a bonafide house rented for $350?? I'm getting that on a 1 room efficiency in a moderately low rent area. Yes indeed, an increase is in order.



E-Mail: [email protected]
Telephone: 502-321-6328


Bryan A. Donor

Real Estate Investor from Charlotte, North Carolina

Apr 06 '11, 01:29 AM


david, it depends on the city, local economy, vacany rate, and in some cases which parts of town...i have a 2 bedroom house rented for 375...bought it for 10k, so i'm fine with 375 for now...2 blocks over i own a 4 unit that each apartment is rented for 450...go figure...one block is not as desirable as the other



Bryan A., Carolinas Revitalization, LLC
E-Mail: [email protected]
Telephone: 704-905-6510
Website: http://www.facebook.com/carolinasrevitalization
To see ongoing and upcoming projects, please like us on Facebook!


Robert Steele

Real Estate Investor from Lucas, Texas

Apr 06 '11, 07:45 AM
8 votes


If you are at all like most landlords, you dislike rent raises for fear of vacancies.

To have the desired effect, raising rents requires a policy as carefully outlined as your rent collection policy, one calculated to minimize tenant dissatisfaction and resentment. Rent raises under this policy should occasion neither a mass revolt nor a mass exodus of your tenants because they should come to understand that your rent raises are fair and, therefore, acceptable.

This policy should involve six elements - careful preparation, proper timing, extended lead time, reasonable increments, amicable notices, and personal contact.

Careful preparation for rent raises consists of much more than merely preparing the notices to change terms of tenancy. Prepare by keeping up with your bookkeeping every month so you know how much your expenses are and how high you need to raise the rents in order to operate profitably.

The best time to deliver the rent increase notice is right after tenants have paid their rent, when the have put rent out of their minds for another month and it's no longer a matter of immediate concern.

Normally any changes in terms of tenancy, including rent increases, require a lead time equal to the rental period. This isn't enough lead time for rent increase notices. I recommend doubling the lead time for rent increase notices. Here's why.

Upon receiving a thirty-day notice that their rent is going up, some tenants have a knee-jerk reaction and immediately give notice that they're going to move. They know that they're supposed to give you 30 days notice, and they feel that they have to register a quick protest to your notice. Your notice is a threat to them, and they feel certain that they can find a better place to live for less. Even when the discover that they can't, they may feel to proud to cancel their intention to move.

Your tenants will appreciate a 60 day notice. They will feel far less threatened when you give them time to consider their alternatives.

You should know what rents are reasonable for your rentals and you will also then know how much the raise should be. because your final figure will usually be the result of numerous compromises you may want to select and increment which is psychologically more acceptable to your tenants. The more acceptable numbers are those which are not multiples of 5. $12, for example, is better than $10, and $18 is better than $15. Such figures lead tenants to believe that their increases have been carefully calculated to match actual increases in operation expenses rather than to include still more arbitrary profit for the owner, round up, of course, to the nearest $5.

You are taking a calculated risk of creating vacancies with any rent increase you give, but that risk increases somewhat if the rent increase exceeds the consumer price index. If you have timidly lagged behind the marketplace and you now have to raise your rents much higher, you may want to do so even knowing full well that some tenants are going to vacate. Wish them well, and then don't get yourself into the same bind again. Raise your rents on an annual basis from then on.

You should announce your raises officially in writing using honest, sympathetic notices. The notice should soften the blow with some reasons for the raise and an expression of your personal concern about the possible hardships the increase might cause.

Use of a cold impersonal legal notice like the Notice of Change in Terms of Tenancy if you wantm but add to it your own personal message. Mention the tenant by first name in a handwritten aside and apologize for the increase, saying that you are trying to maintain the tenant's dwelling as best you can, but it is impossible to do so unless you raise rents.

Or you might want to prepare your own complete notice using personal wording like this - As you know, we are living in inflationary times, and even though I do my best to keep costs down, there's no way I can reduce the expenses of this building back to what they were a year ago. I have absorbed these increases as long as I could, but now I am forced to increase you rent by $___, or ___% from $____ per month to $____ per month, effective ____, 20__.

You may deliver a rent increase in person or by mail, but personal delivery is preferable because it provides an opportunity to discuss the reasons the the increase with your tenants on a personal level.

http://www.amazon.com/Landlording-Handymanual-Scrupulous-Landladies-Themselves/dp/0932956300



Maryann L.

Real Estate Investor from Methuen, Massachusetts

Apr 12 '11, 08:27 AM
1 vote


Just wanted to update everyone. My raise the rent letters with gift certificate for good tenancy were received 4/5 - I got both back by today with signatures acknowleging the new rent and where they wanted their gift certificates!!!!

My super duper great tenant not only mailed me back my letter acknowlegement and gift cert request BUT MY RENT CHECK for next month!!!! NOT even post dated....

I will forever use this method. BEST gift certificates I ever bought!! I just made me an extra $450 this year in rent raises without a blink!



Michael Rogers

Real Estate Investor from Ooltewah, Tennessee

Apr 12 '11, 09:14 AM


Just wanted to update everyone. My raise the rent letters with gift certificate for good tenancy were received 4/5 - I got both back by today with signatures acknowleging the new rent and where they wanted their gift certificates!!!!

My super duper great tenant not only mailed me back my letter acknowlegement and gift cert request BUT MY RENT CHECK for next month!!!! NOT even post dated....

I will forever use this method. BEST gift certificates I ever bought!! I just made me an extra $450 this year in rent raises without a blink!


Smitnlit - I like your idea of giving them something along with the rent increase. When you renew their leases are you doing it for another one year term or do you let them go month-to-month? Just wondering if any of them that are on month-to-month leases get their gift certificate then move out a couple months later?



Maryann L.

Real Estate Investor from Methuen, Massachusetts

Apr 12 '11, 10:13 PM


All my leases are yearly. We have a property right on the beach and we compete with summer rentals and we don't want to deal with that. We found having full time tenants that the place was better taken care of.

The first year we owned the building, we had a young girl in our 1 bedroom who ended up breaking her lease in September (started May 1) and you could tell she only wanted to be there for the summer,b ut by the time she moved out we finally caught on. She got a sweet deal.

Anyways, I have two renewals at a higher amount. It's a good strategy.



David Lopez

NORTHRIDGE

Jan 08 '12, 07:49 AM


Hello. I am new to the group. Does anyone have any preformed letters to send to the tenants when raising the rent?



Rob Gillespie

Real Estate Investor from Fairview Park, Ohio

Jan 08 '12, 08:14 AM


John,

I would not do it in a letter, I would meet with them in person and tell them how upset you are with your partner. Explain that he or she wants to raise their rent 50 bucks per month, and you are furious because they are good people! Then ask them if they can do a 25 dollar increase. Tell them you will go to bat for them to get your partner down a little. Tell them if they get an increase, you will make sure you do (fill in the blank) a new ceiling fan, paint job, front door, etc... this way they feel they get some value for the increase.

I personally do not advocate lying, but this is a good technique. You will leave there a hero and get more money too.



David Lopez

NORTHRIDGE

Jan 08 '12, 09:01 AM


My properties are out of state and have management. Should i have them do it in person?



Cheryl C.

Residential Landlord from Reston, VA

Jan 08 '12, 09:09 AM
2 votes


Ah, this has reminded me to get out my calendar and check on lease expirations. I do the same as many have posted: give a longer than required notice (60 days vs 30), mention what a terrific tenant they are and how I've reflected this fact in the amount of the increase, encourage them to call me if they wish to discuss this matter or any other, etc. I check the comps and I am sure that my tenants are well aware of the comps (I do sometimes send them a list - which I get courtesy of management companies trying to get my business!). I ask them to let me know if they need any repairs. I send a simple "Lease Addendum" with my letter and a self-addressed envelope (stamped) for return. I, too, have many long-term tenants and I try to keep them happy and also keep the rents close to market. It can be a tough balancing act. I'd rather do a letter (and include the addendum) than a phone call; just as I'd rather let the answering machine record a message than pick up the phone. Listening to the message gives me time to think and not get boxed in when caught off-guard on a request. My mother used to tell me that whenever a tenant asked for something your first response should be NO or I have to discuss it with my spouse, business partner, etc.

btw - I sent all my tenants smoked turkeys at Christmas. It was a huge hit.



Bill Wallace

Residential Real Estate Agent from Mound, Minnesota

Jan 08 '12, 03:14 PM
2 votes


I send them Craigslist links to show them that other very similar units are charging higher rents and then pick a new rate that's lower than the ones I just sent them to show them I'm still giving them something lower than what I might get should they leave.



(Don't Want to See This? Log in or Create a Free BiggerPockets.com Account!)

Ubg-book

Get the Free eBook from BiggerPockets

Get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks, and techniques delivered straight to your inbox twice weekly!

  • Actionable Advice for Getting Started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more!

Sign up below to download the eBook for FREE today!

We hate spam just as much as you


To post a reply or start a new discussion, create a free account or login.

Manage Keyword Alerts

View All Forums