Raising Rents Without Losing Tenants? Here's the Strategy That Worked for Me

[Dion McNeeley]

Hey landlords and soon-to-be retirees — I’m hosting a free webinar on July 10 at 12 PM ET to walk through the Binder Method. This strategy helped me raise rents without tenant turnover and gave me the confidence to retire early with rentals.
I’ll share:

• The exact framework I used (and how you can too)
• How it applies to Section 8, rent control, and PMs
• My mindset shifts on early retirement

There will be a live Q&A also so ask away! And yes… the “rude” questions, too.

👉 Register here if you want a better way to raise rents

[Marcus Auerbach]

Hi Michael! All valid points and considerations, I am totally with you. Especially the math: we estimate that a turnover will cost us on average about 5k between hard and soft costs. Totally not worth $50. And if my numbers don't work as an investor, that is really my problem - and the wrong approach to make it the tenant's problem.

I used to oppose rent increases for my first  7 or 8 years. The main reason why I became an advocate for annual rent increases is a long-term perspective. As an agent, I see too many leases that were signed 8 or 12 years ago and are wildly below market rent.

It is very tempting to skip an increase. And the next one. And before you know, 10 years have passed and you are still at the rent from 2015. Or 2010..

But all our expenses are indexed for inflation. 

Our cost for insurance has gone up a LOT even here in Milwaukee about $30 per single family this year (thanks FL and TX). Replacement costs have gone up massively (have you paid for a new roof lately? Almost double compared to when I started) and then you have interest rates. 

Not increasing rents means your profit margin is shrinking every year with inflation. 

So, how do we balance these conflicting forces? We monitor two things: market rent increases and wage increases. And we usually benchmark the lower of the two. This year it was definitely wage increases because our rental market is extremely hot. This way our long-term tenants stay slightly below market rents.

I know they are not happy about the increase, just like I am not happy about my expense increases. Most will probably shop it around and find out that they are still getting a pretty good deal (and 5-star service). As a result,  despite the annual increases, our turnover rate is below 10%.

Not increasing rents creates a situation where you are falling more and more behind and then you have to make tough choices. A tenant can adjust for $50 much easier than if one day you have to sell the building and the new owner adjusts to market rent, resulting in a $500 increase.

I also run an annual survey with our RPA members (Rental Property Association of Wisconsin) and guess what: larger and more senior landlords are a lot more likely to be consistent with increases than newer and smaller owners.