Tenant requesting long-term lease - how to bring up rent increase

[Marc Sudd]

New landlord here, coming up on the end of a 1-year lease for a home in Seattle suburb. The lease agreement has, written in that upon expiration of the 1 year lease that a month to month agreement would begin. The tenants contacted me regarding this and would like to set up a lease longer than one year. I don't mind the tenants and they are pretty good in my estimation, but I'm not sure why they wouldn't just continue with the month to month. Also, having a lease greater than a year requires a notary in Washington state, so quite the headache. I really don't want to bother with writing another lease, would it be dismissive to suggest that we just stay on a month-to-month basis?

The other thing is that rentals in our area have gone up in price significantly, with a friend who does property management telling me that we should raise rent by a minimum of $150, since all rentals nearby are going up correspondingly. I really don't want to antagonize the tenants, who have been pretty good so far, although realistically, they would not be able to find something like they have now for the same price point with the way the rental market is in Seattle.

How should I bring up the topic of a rent increase (or should we avoid doing so for the sake of keeping low maintenance tenants), and is there any reason I should create a new lease with them besides the security of keeping tenants in the unit? They have previously let me know that they plan to stay for several years, but who knows.

Thank you!

[Tim J.]

When I raise rents I mention explain taxes and insurance hikes.  But that's not something most tenants care about or consider.  What works for me is that I offer to match or be below any comparable rental listing they show me.  Never once has a tenant been able to bring me a comparable.  I like to be a bit below current market rents so I can keep good tenants.  

If the tenant spends the time to research the current market they usually find that they are BELOW market even with the new proposed rent, or, many times, there is just nothing even out there.

Communicate.  When discussing rent increases it can be an adversarial thing, but don't dwell on it.  Just explain that you have done research, and want them to stay, but the rent is going up. 

Also, it's a lot easier telling other landlords what to do - for years I let one of my rentals remain low when I should have been raising rents.  

If you keep a healthy reserve you won't fear a turn/vacancy - and in the long run you are better off with keeping market rates.  This is especially true with multi-family or a large SFH portfolio...  consider the net effect of raising the rent $50 across a portfolio of 20 houses or units.