Homeowner · Philadelphia, PA · Member since 2015 · 70 posts · 24 votes
Hi! I inherited tenants paying 600. For an 800 sq ft 1 bed apartment in an ok area of Philadelphia. I pay water/sewer, trash, public lighting, and gas. I kept that rate for 10 months Its renewal time. I lost 9 grand on the apartment according to my accountant because its rented below market value. Can I go up 100?
Hello @Cheryl Daniels, have you done a rent comparison in the area your property is located to determine the amount of the rent increase. I am a buy and hold investor in Philly. One bedrooms about your size in decent neighborhoods rent in the range of $625 to $675. Depending on where your property is located and the current shape of the property (last time property was refreshed with paint, updated appliances, cosmetic fixes, etc.) a $700 dollar a month rent may not be warranted. If a tenant can rent a place that is newly renovated with new appliances, etc., for $700 or stay in your place that needs some TLC, which option would you take. Sometimes apartment rent below market rate for a reason.
I had a situation similar to yours. I purchased a property last year with tenants in place. A duplex. One unit was renting for $425 per month. Incredibly below market rate (market is $625-$675). The tenant was a 70 year old women who had been in the apartment since 1990. The first floor tenant's rent was $100 higher but still under market as well. Of course a rent increase was in order. However, the previous owner hadn't touched the apartments in years (not even a fresh coat of paint...he had inherited the property and the tenants) and everything needed to be replaced. In order to avoid putting a hardship on the tenants, and because they were living in conditions that in my opinion did not warrant a up to market increase. I increased each rent by $25. Within the year the tenant vacated the one unit that was renting at $450. I immediately renovated and modernized the unit. I put an ad for rent on Craigslist on a Thursday. Friday I got a call for a showing...showed it Friday evening and Saturday morning the prospective tenant submitted a rental application. Tuesday I had a tenant paying $650 per month. I could have gotten more, but I did not provide a refrigerator nor is there a washer/dryer in the unit.
As landlords I understand that we want to get the maximum amount of rent we can, we need to cover our expenses and return a profit. But we need to keep in mind that tenants pay us for a service and our first priority is to ensure the customer is being given a quality product.
You can but some may leave. If it's more than 1 unit perhaps stagger the increase. If it's just the 1 unit then perhaps wait unit June 1 to increase it because it will be easier to rent in prime season. Good luck!
How many tenants? What would happen if they all left with a $100 increase? How quickly could you re-let it? Is the $100 increase at or still below market? If you can absorb the impact of losing some or all the tenants raise the rents. If that is a concern, maybe $50 now and another $50 in six months?
If you have to ask you are in the wrong business. A single unit that lost 9 grand last year is a very poor investment and raising the rent $100 is not going to help your situation. Your best option would be to sell now before you lose any more.
You might have misunderstood her post. I think she means she lost 9K when comparing what she could have gotten if she rented at market value. Meaning she lost 100 per month, per unit, accumulating to 9,000 for the year, which looks like 7-8 units.
You can but some may leave. If it's more than 1 unit perhaps stagger the increase. If it's just the 1 unit then perhaps wait unit June 1 to increase it because it will be easier to rent in prime season. Good luck!
Thx. Melissa. Ill stagger the increase in increments of 50. The other unit is vacate now. Ill rent at market rate.
How many tenants? What would happen if they all left with a $100 increase? How quickly could you re-let it? Is the $100 increase at or still below market? If you can absorb the impact of losing some or all the tenants raise the rents. If that is a concern, maybe $50 now and another $50 in six months?
There were two. One just vacated. 100 would bring it close to market. Raising the rent incrementally is the way Ill go. The new tenants will be at market. Thx!
Hi. I would recommend to look at the utilities you pay. Maybe let them share in the cost of some of your expenses. So it could be a combination of the two raise the rent and or pay more for utilities.
Hello @Cheryl Daniels, have you done a rent comparison in the area your property is located to determine the amount of the rent increase. I am a buy and hold investor in Philly. One bedrooms about your size in decent neighborhoods rent in the range of $625 to $675. Depending on where your property is located and the current shape of the property (last time property was refreshed with paint, updated appliances, cosmetic fixes, etc.) a $700 dollar a month rent may not be warranted. If a tenant can rent a place that is newly renovated with new appliances, etc., for $700 or stay in your place that needs some TLC, which option would you take. Sometimes apartment rent below market rate for a reason.
I had a situation similar to yours. I purchased a property last year with tenants in place. A duplex. One unit was renting for $425 per month. Incredibly below market rate (market is $625-$675). The tenant was a 70 year old women who had been in the apartment since 1990. The first floor tenant's rent was $100 higher but still under market as well. Of course a rent increase was in order. However, the previous owner hadn't touched the apartments in years (not even a fresh coat of paint...he had inherited the property and the tenants) and everything needed to be replaced. In order to avoid putting a hardship on the tenants, and because they were living in conditions that in my opinion did not warrant a up to market increase. I increased each rent by $25. Within the year the tenant vacated the one unit that was renting at $450. I immediately renovated and modernized the unit. I put an ad for rent on Craigslist on a Thursday. Friday I got a call for a showing...showed it Friday evening and Saturday morning the prospective tenant submitted a rental application. Tuesday I had a tenant paying $650 per month. I could have gotten more, but I did not provide a refrigerator nor is there a washer/dryer in the unit.
As landlords I understand that we want to get the maximum amount of rent we can, we need to cover our expenses and return a profit. But we need to keep in mind that tenants pay us for a service and our first priority is to ensure the customer is being given a quality product.
Hi. I would recommend to look at the utilities you pay. Maybe let them share in the cost of some of your expenses. So it could be a combination of the two raise the rent and or pay more for utilities.
Thanks you Dirk. The utilities that I pay are increasing this year (gas, water/sewer and public lighting). I am considering getting submeters to determine how much each unit uses. However, I don't know enough about submeters. Okay, I am looking at how that would break down. Thanks again.
The biggest rent increases for us come when there is a tenant turnover and we would typically clean, paint, repair and upgrade at that time. This past year we raised some rents by $260/mo.
We've had long term tenants, as long as 30 years and their rents are typically not raised every year, but that creates a position where they get further and further behind versus market rents.
Costs go up every year for taxes, insurance, maintenance, utilities, etc. When we raise rents I try to explain that in terms of costs going up and upgrades that we made. But typically we try not to raise rents drastically on existing tenants. At one place this year the condo fee went up $35. I only raised the rent $10, but explained to the tenant that the condo fee had risen by much more.
One time I bought a rental with an existing tenant, that the owner had never raised the rent in many years. When the tenant's lease expired I raised the rent $200, from $550 to $750 for a 3 bedroom place. The tenant threw a fit. Angrily called me and even had somebody else call me also. I explained that even at $750, the rent was still well below market rent, and that to reassure them selves they didn't have to take my word for it, go look at other places and if you find a better, cheaper place feel free to move. After a couple weeks the tenant came back to me a signed anew lease. I was vindicated, their rent was STILL below market and they found that to be true. btw, they stayed for 3 more years then bought a home of their own.
As @Paulette Midgette mentioned, you should really check into what competitive units (and very close in location yours) are renting at. Tenants will move if rent is hiked too much all at once. There are some neighborhoods where one bedroom units do rent for around $1000 per month, and others where you could never expect more than $700 per month.
BTW, if this inside Philadelphia, the new city ordinance requires sixty days notice for a rent increase. HAPCO usually challenges stupid stuff that the city imposes upon landlords, but I have not heard of any challenge to this yet.
Good afternoon Paulette. I have done somewhat of a price comparison. The unit is $ 50 -100 below other rentals in the area. I don't offer as many amenities washer/dryer, dishwasher, on-site parking) I have spent over $ 1000 repairing water damage to the floor and other repairs. Also I pay water/sewer, hot water, trash removal) These utilities have or will increase this year. I don't know another way to off set the costs other than raise the rent. Thank you.
The biggest rent increases for us come when there is a tenant turnover and we would typically clean, paint, repair and upgrade at that time. This past year we raised some rents by $260/mo.
We've had long term tenants, as long as 30 years and their rents are typically not raised every year, but that creates a position where they get further and further behind versus market rents.
Costs go up every year for taxes, insurance, maintenance, utilities, etc. When we raise rents I try to explain that in terms of costs going up and upgrades that we made. But typically we try not to raise rents drastically on existing tenants. At one place this year the condo fee went up $35. I only raised the rent $10, but explained to the tenant that the condo fee had risen by much more.
One time I bought a rental with an existing tenant, that the owner had never raised the rent in many years. When the tenant's lease expired I raised the rent $200, from $550 to $750 for a 3 bedroom place. The tenant threw a fit. Angrily called me and even had somebody else call me also. I explained that even at $750, the rent was still well below market rent, and that to reassure them selves they didn't have to take my word for it, go look at other places and if you find a better, cheaper place feel free to move. After a couple weeks the tenant came back to me a signed anew lease. I was vindicated, their rent was STILL below market and they found that to be true. btw, they stayed for 3 more years then bought a home of their own.
The tenant that is inherited from the previous owner has not seen a rental increase in many years. I trying to recover the cost of repairing water damage done by a leaking toilet, and other repairs. And as you have mentioned in your comments utilities, taxes and insurance are increasing this year. I'm thinking of explaining to the existing tenants the increased cost and the plan to add washer/dryer and replace all windows. I may increase their rent a smaller amount than I originally planned- maybe 650 to 675 incrementally instead of 700. Thanks for your response!
Hi @Cheryl Daniels, thanks for the heads up on the increases. Can you tell which utilities have of the two you mentioned has increased this year (I did receive a notice from PGW of a proposed hike) and which one will increase. I paid my trash removal fee for 2016 and it was the same as 2015. I have not heard of a hike in the water rates, but I don't always read the fillers that are placed in the water bill.
@Steve Babiak, you are always up to date on what in going on in Philly, have you heard of any pending increases?
@Cheryl Daniels Tenants don't care about your bills or costs, so I wouldn't go there. But, if you could do the sub-metering, that would really help.
Otherwise, as others have said, you need to think from the tenant's perspective. They will pitch a fit and go look at the ads to see what they can get for the same amount or less than the rent increase. If the increase looks fair, they'll stay and usually get over it pretty quickly.
Also, not all tenants have the money to move. That can keep them from leaving for a while, too, although they might be uncooperative to deal with.
Hi @Cheryl Daniels, thanks for the heads up on the increases. Can you tell which utilities have of the two you mentioned has increased this year (I did receive a notice from PGW of a proposed hike) and which one will increase. I paid my trash removal fee for 2016 and it was the same as 2015. I have not heard of a hike in the water rates, but I don't always read the fillers that are placed in the water bill.
@Steve Babiak, you are always up to date on what in going on in Philly, have you heard of any pending increases?
I read it in a newsletter and checked online; proposed water rate increase starting 7/1/2016 of 11%, about $8 per month.
Good points. The increase has to seem fair and to address the possibility of being uncooperative, I'd have to offer something... (fresh paint; although as a tenant, I'd be annoyed by the inconveniences) Thank you!
@Steve Babiak, you are always up to date on what in going on in Philly, have you heard of any pending increases?
HAPCO newsletter and forum are good sources for keeping up to date in Philadelphia - about $10 per month to be a member (fee is annual). DIG often has some news published as well.
@Cheryl Daniels If your rents are below market rent, then by all means increase the rent. Depending on the number of units your apartment have, you could start small (implement the $100 increase in 2-4 units) and raise the rent in the other units gradually but let the tenants know ahead of time.
Thanks @Cheryl Daniels, I will check the website for more information. Thanks@Steve Babiak as well. I am a member of HAPCO and haven't seen any talk about water or refuse collection increase there. Normally, these things (at least utilities hikes) get a mention on the local news station. It is good to have forums such as this to get news that is missed through other channels.
If as a landlord you have come in and are starting to maintain better then the previous owner the rent increase may be received a bit better. That is at least what I heard from my tenants when I took over the last place. They had expectations I would fix things that the previous landlord did not fix. You don't always get more when you pay more, utilities increase due to cost without giving you any better service. While you may feel bad about an increase without doing something there are times when it is necessary due to your costs. Your turnover unit will tell you what's market and then adjust for condition of the not updated unit.
Painting inconveniences the tenant but some improvements you can do without disturbing the tenant too much include updating a fridge, toilet or vanity. I had one tenant who had a really old and loud fridge she was happy to see replaced. Old high volume toilets changed out helps you too although not every tenant will appreciate it.