Rate of rent increase

9 Replies

I have a property that has incurred a lot of expenses this past year, and the current tenant’s lease is coming up for another year. I know there are no hard and fast rules, but what percentage of rent increase would any of you charge from one year to the next?

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If rent at market when lease is new then with tenant staying my increased costs such as taxes, utilities, insurance etc. It is amazing sometimes how much that can be and it is easy to tell tenant it is just my increased expenses. When tenant moves then a big increase.

Trick question here: Do you want them to stay, or do you want them to move?

Nominal regular increases allow you to keep close to market rates without getting higher than market. Always keep the market rent in mind. If you want them out, jump to much higher than market and they will get the hint. If you want them to stay, keep at or below market and be certain to emphasize that your increase has the rent at an amount that still a good value in that market. 

Every now and then you get hit with a big increase in recurring expenses; if you raise because insurance or property taxes went up, that is recurring and you have to raise to cover that ongoing expense. If you have a capital item, that should get paid from reserves so that you don't have to increase due to what I would say is poor planning / poor management. 

Originally posted by @Steve Babiak:

 If you have a capital item, that should get paid from reserves so that you don't have to increase due to what I would say is poor planning / poor management. 

Yes it is mostly a capitalized expense like excavation for a sewer line, and the fried garage electric panel that I mentioned in another thread you have helped on.  Both of these things are not what I can directly blame the tenant, but still I am suspicious.  The plumber found gross gobs of hair in the pipes when it was first snaked.  The electric issues were discovered when this tenant rigged his own compressor in the garage directly against the policy in my lease. 

There are only five people in this house yet they run the washing machine EVERY day.  I have a well in this house, so they get free water.   But yes they do keep the house clean, and the rent has only been late once. 

I would like to hear from more landlords as to the biggest increase they have ever charged from one year to the next.  Yes, I know the market will ultimately dictate this, but in my research there are not a lot of rentals for comparison  in this area.  There is a huge apartment complex a mile away, and most renters live there.  

Have you tried rentometer.com ?  I just learned about that site.  Perhaps not super accurate, but depending on the neighborhood, could give you an idea

Mark Forest the rate will depend on your market but one tactic I do that's worked well is have a 3% increase after the lease expires. Then, when it comes time for lease renewal we tell the resident that we will not increase it 3% but instead it will only be 2%. We've had a good response to this approach and I learned about it on BP. 

Originally posted by @Steve Might:

I would like to hear from more landlords as to the biggest increase they have ever charged from one year to the next.  Yes, I know the market will ultimately dictate this, but in my research there are not a lot of rentals for comparison  in this area.  There is a huge apartment complex a mile away, and most renters live there.  

I have an automatic rent escalator clause in my lease, so I have had 6% and 8% increases take effect; I now have it set at 8% automatic increase.  I typically will offer a new 12 month renewal at a much smaller increase (no more than 4%), or allow the escalator to kick in going month to month.  The ones who went month to month at 6% and 8% were going to move anyway ...