Lease up for renewal, advise on rent increase
2 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes4y
Quote from @Amy Lee:
Hi everyone! Just joined BP, heard a lot of good things about this knowledgeable group. Need some advice on how to handle rent increase. My tenants been renting my house for the past 3 yrs. and I have not raised their rent. Their lease will be up for renewal in a couple of months. They are wonderful tenants and express interest in renewal another year or two. With costs going up, I need to increase my rent in order to break even. How much would be a reasonable amount? Any advice and suggestions are much appreciated!
Amy
Amy, you need to look at your market and determine what a fair rate is. The last two years have seen record increases for rentals. If your home rented for $1,500 three years ago, it's probably renting for $2,000 today. A quick Google search shows:
- The average rent for a studio apartment is $1,604
- The average rent for a 1-bedroom apartment is $1,868
- The average rent for a 2-bedroom apartment is $1,994
- The average rent for a 3-bedroom apartment is $2,126
These are generic numbers for apartments. Homes are of more value, and price depends on location, square footage, quality, amenities, and other factors.
My personal recommendation is that you never let rent get more than 10% below market because then it gets really hard to catch up. If your current renters are capable of handling a large increase, I would keep them and "reward" them by raising rent to 5% or maybe 10% below market. If that's too big of an increase for them to handle, it's best to move them out and place someone that can afford market rates.
The DIY Landlord Book4.7248 Reviews - Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes4y
Quote from @Nathan Gesner:
Quote from @Amy Lee:
Hi everyone! Just joined BP, heard a lot of good things about this knowledgeable group. Need some advice on how to handle rent increase. My tenants been renting my house for the past 3 yrs. and I have not raised their rent. Their lease will be up for renewal in a couple of months. They are wonderful tenants and express interest in renewal another year or two. With costs going up, I need to increase my rent in order to break even. How much would be a reasonable amount? Any advice and suggestions are much appreciated!
Amy
Amy, you need to look at your market and determine what a fair rate is. The last two years have seen record increases for rentals. If your home rented for $1,500 three years ago, it's probably renting for $2,000 today. A quick Google search shows:
- The average rent for a studio apartment is $1,604
- The average rent for a 1-bedroom apartment is $1,868
- The average rent for a 2-bedroom apartment is $1,994
- The average rent for a 3-bedroom apartment is $2,126
These are generic numbers for apartments. Homes are of more value, and price depends on location, square footage, quality, amenities, and other factors.
My personal recommendation is that you never let rent get more than 10% below market because then it gets really hard to catch up. If your current renters are capable of handling a large increase, I would keep them and "reward" them by raising rent to 5% or maybe 10% below market. If that's too big of an increase for them to handle, it's best to move them out and place someone that can afford market rates.
I could not agree more.
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