Raise Rent or Not to Raise Rent

[Diran Deukmajian]

I have an investment property in upland, CA.  The 1st year I got screwed and the tenant was a nightmare....had to use legal services to throw her out. 

2nd year, I found an amazing tenant and has been paying on time and no problems.  Amazing family.  

This tenant 1 year lease is coming up....do I raise the rent? If I raise it too much, they might leave and I dont want that.  Or do I raise it just a bit and hope they dont leave? 

What advice can you give me if you've had experience in this area?

[Caleb Brown]

There are 2 trains of thoughts and ultimately there's not a 1 size fits all. 

First thought is to do increases to keep in line with market rent. You can do bigger ones or smaller ones to not get behind the curve. Benefit is you are keeping up with your increasing costs and not short changing yourself. Negative is they can be upset and leave. Most tenants won't if you maintain the property and you are priced fairly. 

The other train of thought is not raising. This keeps the tenant happy and increases the chance they stay for a longer period of time. That means they stay longer and you won't have to worry about vacancy or a turnover. Often it's easier to manage and saves you some money on updating the cosmetics. Downside is you are locking your cashflow in at a number. If your costs increase then you aren't keeping up. 

End of the day it's preference and a balance.