Tenant is unhappy with the rent increase

Member since 2018 · 563 posts · 562 votes

@Kar Sun thanks for being a thoughtful, considerate and highly conscientious person!

I appreciate your efforts and I find it helpful to read through this thread and further solidify my own beliefs and views that have already been stated, by you and others, multiple times, so, no need to echo them.

Best of luck and fortune!

2 Reply

Justice Short

Property Manager · Columbus, OH · Member since 2021 · 9 posts · 8 votes

4y

@Kar Sun I totally understand where you are coming from but as a property manager now for luxury apartments, a $400 hike is pretty extreme. I would try to negotiate with him on the increase personally. Although it may seem worth it to have more money this year, it may be worth it more to not have a vacancy as well as maintain a great relationship so he leaves your property the way he received it.

Also, have you thought about structuring your leases differently? A minor example: let's say you have a SFH with a garage that you want $1400 out of. You could state that the rental is $1300, and the garage is a rentable item for $100 per month. Sometimes this helps from my experience.

Good luck with whatever you decide to do!

1 Reply

Matt Ziegler

Rental Property Investor · Colorado Springs, CO · Member since 2020 · 433 posts · 284 votes

4y

This is one reason why small annual rent increases are the best policy. Costs go up every year and so should your rent rates. This increases should be reasonable(5-8%) per year.

With the exception of dire circumstances( like a pandemic) this should be a normal course of business. Without doing yearly increases, you end up playing catch up with market rates and getting the type of response that you are experiencing now.

Best of luck,

Cheers.

1 Reply

Will BarnardPro Member

Moderator

Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes

4y

"Tenant is unhappy with the rent increase"

And I am unhappy with gas prices, food prices, inflation, politics, the inept building and safety departments, etc. But all the wining in the world will not change the facts and as such, your tenant needs to pay the increase or find a new place to live.

That said, a $400 monthly increase does seem steep all at once and quite frankly, it was your own fault for not raising the rents in smaller increments each year. Perhaps a better explanation is in order or perhaps a lower increase now and another each of the next years. YOu may be better served explaining to your tenant that due to extreme and unprecedented circumstances, you did not raise the rent during the pandemic to help your tenants but do need to retroactively raise them now to catch back up. If that explanation fails, then you have two choices, stick to your $400 guns and let him leave or pay, or make the increase smaller today and increase again in 6 months or a year.

Podcast Guest on Show #130

1 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

4y

Quote from @Noah P Bonds:

I think this speaks to a greater need to educate renters on the reality of how their rent is set. They don't see our side. I would consider adding something to your future leases that explains how your rents are set.

Awesome idea! Make it clear right up front!

1 Reply

David Mathews

Lake Charles, LA · Member since 2016 · 99 posts · 54 votes

4y

Quote from @Kar Sun:

Quote from @Bill B.:

Exactly. Then situation #2 occurs. The tenant finds out you are still being generous with your rates. And either they pay it because they love their standard of living and hate moving. Or realize they can no longer afford their same standard of living. I assume you wouldn’t write your tenant a check every month for $400. That’s basically what you’d doing when charging under market. PLUS, if the “saviors” ever come in and pass rent control you’re screwed because you were nice.

GL.

He was actually pretty mean when texting me stating that my property is not worth it and it is a money grab.

He was also saying that my mortgage did not change and that he was checking with the neighbors.

I really do not like that he is doing all this snooping.

That does not look good.

Also he stated if he accepts it is under a duress.

I really do not want to have a relationship with a tenant who sees the contract as a "duress".

I am not sure why he is doing it, perhaps he has been traveling a lot and is stressed.

I believe that I would be in the same boat as you with the feeling that I wouldn't even want to continue the relationship with him. I'm not saying that I would automatically move forward with a nonrenewal but I would definitely put that on the table for him to think about. Like you said, you really do not want to have a relationship with a tenant who sees the contract as a "duress". So in those very words I believe that I would put that in his court.

Dear Tenant,

I would like to start by saying that as a business owner I appreciated our mutually beneficial business relationship. However, also as a business owner I must run my business as just that. A business. We have been reluctant over the past 3 years to raise rents at the same pace that the market has increasing by and it has created this delima. I realize that you feel this is an unreasonable increase but it is a necessity in order for this to continue being what it is. A business. One that requires operating with margins. I hope that after you research our local market you will see the value in our property but should you still feel that you are "under duress" with renewing the lease at our adjusted fair market rent amount then perhaps our property is no longer a good fit for you.

On (DATE) we will require a new signed lease agreement reflecting the adjusted amount. We respectfully await your decision.

Property Owner

After that it's all his decision and whatever you do don't take his responses personal. I know that's hard. Probably one of the hardest parts of managing your properties. But necessary. If he continually responds with ugliness then just respond with that same line each time: "I wouldn't want you to be unhappy with our property so if you feel that way then perhaps it is no longer a good fit for you."

1 Reply

David Krulac

Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes

4y

On Thursday, 2 days ago went to a REIA meeting where the speaker, Chad Gallagher spoke of his top ten biggest mistakes, one of which was not raising rent every year. He had a good tenant for five years and never raised the rent. In the sixth year seeing how far below market he was raised the rent by a drastic amount, the tenant was upset, moved out and did damage on the way out. He said he learned his lesson to raise rent every year, sometimes by a small amount maybe 1 or 2%, but keeping up with increased expenses.

David Krulac

Bigger Pockets Guest #82

1 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @David Krulac:

On Thursday, 2 days ago went to a REIA meeting where the speaker, Chad Gallagher spoke of his top ten biggest mistakes, one of which was not raising rent every year. He had a good tenant for five years and never raised the rent. In the sixth year seeing how far below market he was raised the rent by a drastic amount, the tenant was upset, moved out and did damage on the way out. He said he learned his lesson to raise rent every year, sometimes by a small amount maybe 1 or 2%, but keeping up with increased expenses.

David Krulac

Bigger Pockets Guest #82

Thank you. That is a great point that I will incorporate so that the tenants do not feel that because they are "great tenants" I somehow have to subsidize their rent. Great tenant is the only tenant expected based on a contract they sign. It is a tenant that plays by the rules. I am not expected to build up their savings while accumulating debt. A good client is not a client that expects deep discounts at my expense. There is not one person in USA that can be shocked at price increase nowadays unless they lived under a rock.

0 Reply

Aj Parikh

Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes

4y

Prices are increasing in every sector and industry. Rent prices are just a reflection of that.

1 Reply

David P.

Member since 2020 · 404 posts · 235 votes

4y

Quote from @Kar Sun:

I have a tenant that pays on time and keeps place clean.

I also offer him a desirable place to live that is being taken care of.

To me nice tenant is not the one who expects me to subsidize their rent.

I provide a service and a roof and that is why I have responsible tenants that I chose to have a professional relationship with.

The place has lot of very desirable amenities and has a great location..

He has been with me for 3 years and I have only raised rent $125 in all these years and last year there was no rate increase.

However, things have changed.

I have expenses, taxes and other costs that must be covered as otherwise I will be in negative..

Also, there is a lot of demand.

I sent a very nice letter to a tenant stating the data and a comparison rate with the market properties.

In my market rental properties went up 124%.

The hike is $400.

Small apartments in my area go for the same as my discounted rate for him.

But the place is spacious and is a townhouse.

He is highly unhappy.

He calls it is a money grab.

He is saying that he is under duress if he decides to stay as summer is a busy season for him.

Well, the contract ends end of summer and the rate increase letter went out prior to that.

There is no rent control in my state.

And in my state I do not even have to send rent increase letters.

This tenant makes 300K in income.

I have been nice responding to his texts but it makes me think if I actually want to keep dealing with him.

He states that my property is not worth the increase.

Well, my property is in such a location and condition that it is difficult to find anything similar.

It is also a business.

Any one wants to share a relevant experience?

Please do not bother to send me points on how to write letters to tenants; mine was very much to a point with all the data, comparison photos, prices....

I just think if as a business person himself he does not value my business why should I renew the contract especially now he says he is under duress.

I did something like this few years ago. I didn't raise rent for 7 years. Great tenants but I was just way under market. I wrote them a text explaining similar points you made and then a formal letter in mail. It was also a $400 increase. Both tenants in the duplex didn't hesitated and agreed to pay the new amount. The new amount I set was still lower than market by some so they knew it was still a good deal. If you can propose an increase but slightly below market that is the strategy I would try.

1 Reply

Branden Yang

Member since 2022 · 42 posts · 10 votes

4y

Quote from @David P.:

Quote from @Kar Sun:

I have a tenant that pays on time and keeps place clean.

I also offer him a desirable place to live that is being taken care of.

To me nice tenant is not the one who expects me to subsidize their rent.

I provide a service and a roof and that is why I have responsible tenants that I chose to have a professional relationship with.

The place has lot of very desirable amenities and has a great location..

He has been with me for 3 years and I have only raised rent $125 in all these years and last year there was no rate increase.

However, things have changed.

I have expenses, taxes and other costs that must be covered as otherwise I will be in negative..

Also, there is a lot of demand.

I sent a very nice letter to a tenant stating the data and a comparison rate with the market properties.

In my market rental properties went up 124%.

The hike is $400.

Small apartments in my area go for the same as my discounted rate for him.

But the place is spacious and is a townhouse.

He is highly unhappy.

He calls it is a money grab.

He is saying that he is under duress if he decides to stay as summer is a busy season for him.

Well, the contract ends end of summer and the rate increase letter went out prior to that.

There is no rent control in my state.

And in my state I do not even have to send rent increase letters.

This tenant makes 300K in income.

I have been nice responding to his texts but it makes me think if I actually want to keep dealing with him.

He states that my property is not worth the increase.

Well, my property is in such a location and condition that it is difficult to find anything similar.

It is also a business.

Any one wants to share a relevant experience?

Please do not bother to send me points on how to write letters to tenants; mine was very much to a point with all the data, comparison photos, prices....

I just think if as a business person himself he does not value my business why should I renew the contract especially now he says he is under duress.

I did something like this few years ago. I didn't raise rent for 7 years. Great tenants but I was just way under market. I wrote them a text explaining similar points you made and then a formal letter in mail. It was also a $400 increase. Both tenants in the duplex didn't hesitated and agreed to pay the new amount. The new amount I set was still lower than market by some so they knew it was still a good deal. If you can propose an increase but slightly below market that is the strategy I would try.

Honestly this is genius

0 Reply

David Mathews

Lake Charles, LA · Member since 2016 · 99 posts · 54 votes

4y

Question for those of you who have raised rent…

How did you do so? With a newly signed lease or an addendum to a current lease?

0 Reply

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

4y

Quote from @David Mathews:

Question for those of you who have raised rent…

How did you do so? With a newly signed lease or an addendum to a current lease?

You can't raise rents on an active lease. So type up a new one when the lease is renewed.

1 Reply

David Mathews

Lake Charles, LA · Member since 2016 · 99 posts · 54 votes

4y

Quote from @John Underwood:

Quote from @David Mathews:

Question for those of you who have raised rent…

How did you do so? With a newly signed lease or an addendum to a current lease?

You can't raise rents on an active lease. So type up a new one when the lease is renewed.

Thank you. Yes that is what I’ve done in the past at renewal time. I’ll usually give significant notice time of increase then new lease at renewal but I’ve been told it is possible to do a signed addendum at renewal time. Not sure if that is true. It would be a little easier though.

0 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @David P.:

Quote from @Kar Sun:

I have a tenant that pays on time and keeps place clean.

I also offer him a desirable place to live that is being taken care of.

To me nice tenant is not the one who expects me to subsidize their rent.

I provide a service and a roof and that is why I have responsible tenants that I chose to have a professional relationship with.

The place has lot of very desirable amenities and has a great location..

He has been with me for 3 years and I have only raised rent $125 in all these years and last year there was no rate increase.

However, things have changed.

I have expenses, taxes and other costs that must be covered as otherwise I will be in negative..

Also, there is a lot of demand.

I sent a very nice letter to a tenant stating the data and a comparison rate with the market properties.

In my market rental properties went up 124%.

The hike is $400.

Small apartments in my area go for the same as my discounted rate for him.

But the place is spacious and is a townhouse.

He is highly unhappy.

He calls it is a money grab.

He is saying that he is under duress if he decides to stay as summer is a busy season for him.

Well, the contract ends end of summer and the rate increase letter went out prior to that.

There is no rent control in my state.

And in my state I do not even have to send rent increase letters.

This tenant makes 300K in income.

I have been nice responding to his texts but it makes me think if I actually want to keep dealing with him.

He states that my property is not worth the increase.

Well, my property is in such a location and condition that it is difficult to find anything similar.

It is also a business.

Any one wants to share a relevant experience?

Please do not bother to send me points on how to write letters to tenants; mine was very much to a point with all the data, comparison photos, prices....

I just think if as a business person himself he does not value my business why should I renew the contract especially now he says he is under duress.

I did something like this few years ago. I didn't raise rent for 7 years. Great tenants but I was just way under market. I wrote them a text explaining similar points you made and then a formal letter in mail. It was also a $400 increase. Both tenants in the duplex didn't hesitated and agreed to pay the new amount. The new amount I set was still lower than market by some so they knew it was still a good deal. If you can propose an increase but slightly below market that is the strategy I would try.

Thanks is exactly what I did. I prepared a nice clean letter with all the data supporting it, including 3 pages of properties with photos and amenities side by side comparison.

0 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @David Mathews:

Question for those of you who have raised rent…

How did you do so? With a newly signed lease or an addendum to a current lease?

You cannot. You can raise it only when the current lease comes up for a renewal. Maybe you can consult with an attorney but I usually want to stay away from them because these vultures will leave you without anything in your pockets with their exorbitant and undeserved fees.

1 Reply

David Mathews

Lake Charles, LA · Member since 2016 · 99 posts · 54 votes

4y

Quote from @Kar Sun:

Quote from @David Mathews:

Question for those of you who have raised rent…

How did you do so? With a newly signed lease or an addendum to a current lease?

You cannot. You can raise it only when the current lease comes up for a renewal. Maybe you can consult with an attorney but I usually want to stay away from them because these vultures will leave you without anything in your pockets with their exorbitant and undeserved fees.

Yep.
If it weren’t for lawyers we wouldn’t need lawyers.

2 Reply

Matt Bishop

Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes

4y

@Kar Sun, you have presented another scenario where the property owner would be very wise to engage a property management company. Is there a reason why you are involved in this situation? Do you just enjoy negotiating and dealing with your tenants? Do you have extra time to be doing work a professional could do better? Are you leaving money on the table by self managing? I bet you are.

1 Reply

Daniel Miller

Fremont, CA · Member since 2012 · 122 posts · 18 votes

4y

This sooo reminds me of the last time we paid rent... it was 1997 (Fremont, CA), landlord raised the rent from $900 to $1150... I said *there is NO WAY I'm paying $1150 to rent a house!!*, and we gave notice that we would move... he then put the house on the market for $1750, only two people looked at it, and one took it!! Wow, was I stunned!!

Now, of course, $1750 would be a *miracle* price for a 3-bedroom house, anywhere in S.F. Bay Area...

ITM, we went on to look into buying a house and getting out of the rental market, which we did... but that's a separate story...

1 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @Matt Bishop:

@Kar Sun, you have presented another scenario where the property owner would be very wise to engage a property management company. Is there a reason why you are involved in this situation? Do you just enjoy negotiating and dealing with your tenants? Do you have extra time to be doing work a professional could do better? Are you leaving money on the table by self managing? I bet you are.

I do not remember that scenario but in my case PM does not make sense. I have a few A class properties in top condition within 2 miles of my residence. I use avail.co for tenant management and thesigningdocs.com for income verification. I have developed a pretty efficient process for the intake. I really do not need PMs. I want to be able to control all aspects of my business and I do not have problems saying "No" to people. I work from home and make a decent salary so I do not mind to take a bit longer to search for the right tenant. In my case using a PM will be leaving the money on the table.

0 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @Daniel Miller:

This sooo reminds me of the last time we paid rent... it was 1997 (Fremont, CA), landlord raised the rent from $900 to $1150... I said *there is NO WAY I'm paying $1150 to rent a house!!*, and we gave notice that we would move... he then put the house on the market for $1750, only two people looked at it, and one took it!! Wow, was I stunned!!

Now, of course, $1750 would be a *miracle* price for a 3-bedroom house, anywhere in S.F. Bay Area...

ITM, we went on to look into buying a house and getting out of the rental market, which we did... but that's a separate story...

I am good with that. If the rent is too high my tenant can go and find rent that is even higher. Or drop his level of comfort and have less amenities. I will be just fine.

0 Reply

Steve Milford

Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes

4y

@Kar Sun I see the issue is really that your tenant-landlord relationship is no longer a business relationship. You care too much about your tenant's "reasons". Who cares. I don't care if my tenant paints the walls pink if that makes them feel better, just pay the stated rent.

When the cost of doing business increases, your price should increase. That's it. All this banter back and forth is just a waste.

When my costs increase, I raise rent by same percentage. It just is.

I am assuming you screened the guy well in the first place, after that, why would you care what income he has? Likewise, if he loses his job he still has to pay rent.

I personally would rather charge a little less than market rate, as I receive less squeaks but that doesn't mean I don't raise rent though. It is still a business.

1 Reply

Kar Sun

OP

Member since 2021 · 402 posts · 277 votes

4y

Quote from @Steve Milford:

@Kar Sun I see the issue is really that your tenant-landlord relationship is no longer a business relationship. You care too much about your tenant's "reasons". Who cares. I don't care if my tenant paints the walls pink if that makes them feel better, just pay the stated rent.

When the cost of doing business increases, your price should increase. That's it. All this banter back and forth is just a waste.

When my costs increase, I raise rent by same percentage. It just is.

I am assuming you screened the guy well in the first place, after that, why would you care what income he has? Likewise, if he loses his job he still has to pay rent.

I personally would rather charge a little less than market rate, as I receive less squeaks but that doesn't mean I don't raise rent though. It is still a business.

I already do what you stated here. I actually believe that our fruitful relationship ended. He was a good tenant for the past 3 years but no longer. His goal is to pay less my goal is to bring my property closer to a market. Yes, I screened him and I am actually not worried about his ability to pay. He just does not want to . I do not not want to have a tenant who is no longer happy in my place as he said he might be signing under "duress". I am waiting to tell him on 7/1 that the lease won't be renewed since he had over the top reaction to my rent increase letter that I d not not even have to send in my state.

0 Reply

Julien J.

Investor · CO · Member since 2016 · 757 posts · 1k+ votes

4y

I find these situations a balancing act. We do everything we can to keep tenants happy and staying long term, however we also consider the following:

- Positioning our income statement and balance sheets for the next loan which means keeping income to debt services ratios in a comfortable range.

- Cost of a unit turn vs market rent. It comes to a point, where you are better off with a new tenant at market rent if your rent increases have not kept pace with market. If it would take 2 years to recoup vacancy and expenses with higher rents, perhaps not the best move.

- It is time to refresh the unit to stay competitive with market? Do you need reinvest capital for tax reasons? If so, an empty unit is a good opportunity to do so and get the unit back on the market at top rent.

1 Reply

Tenant is unhappy with the rent increase

Tenant is unhappy with the rent increase

Most Popular Reply

149 Replies