Updating Lease Terms for Great Tenant

[Don Zuehlke]

I have a property in South Carolina with a very loyal tenant who has verbally expressed a desire to stay for several years. They are relatively low maintenance and take great care of the property, report maintenance issues on time, etc. Needless to say, I value this tenant and don't want to give them any reason to leave. The problem is that I've not been a great INVESTOR and have not increased rent in several years. The median rent for the comps, according to Rentometer and the BP calculator, for the property is about $1,100/mo whereas the current rent is $775/mo.

Question - how do I approach increasing the rent in a way that is fair to the tenant but also fair to me? I was thinking about writing a clause into the new lease that includes a 3% increase per year until rent reaches the median rent. Does that seem fair and reasonable?

Thanks in advance!

[JD Martin]

Quote from @Don Zuehlke:

I have a property in South Carolina with a very loyal tenant who has verbally expressed a desire to stay for several years. They are relatively low maintenance and take great care of the property, report maintenance issues on time, etc. Needless to say, I value this tenant and don't want to give them any reason to leave. The problem is that I've not been a great INVESTOR and have not increased rent in several years. The median rent for the comps, according to Rentometer and the BP calculator, for the property is about $1,100/mo whereas the current rent is $775/mo.

Question - how do I approach increasing the rent in a way that is fair to the tenant but also fair to me? I was thinking about writing a clause into the new lease that includes a 3% increase per year until rent reaches the median rent. Does that seem fair and reasonable?

Thanks in advance!

Prediction: great tenant leaves when rent reaches median or close to it. At the end of the day, renters - especially at that level - values cheap rent above everything else. 

They may be decent people but don't kid yourself that they want to stay for any other reason than you are $500 below market rates. 

 PS: at 3% per year you will never reach median rent. Inflation runs pretty close to those levels.