Increase Rent?

Question

Max T. · Answer

I generally only raise rents when a tenant is moving out voluntarily. I find that it usually costs me more to turn a unit for a new tenant (and vacancy) and get a higher rent than it would to keep a tenant at their current rent.

My rents are pretty competitive so the increases I'm talking about are minimal.

Eddie Werner · Answer

It depends on what similar units are renting for in your area.  Search Craigslist to see who your competition is.  If you have a nicer place and are charging less you need to raise it.    At a minimum always raise at LEAST $10-$20 to renew if you are at market rent.  You will have basic costs increase you need to cover.  If you do raise it I would also suggest making some improvements, they don't have to be big ones, just to show the tenants are getting something for the increase.

Steve B. · Answer

your cash flow and ability to pay expenses has nothing to do with if or how you should raise your rents.  That's like the guy trying to sell his car for whats owed on his lease rather than pricing it at market.

John Hyatt · Answer

Hi Josiah,

I would need more detail because every state and city has different laws. For example, some cities have rent control etc. Also, that depends on market rents in the area. If you are $100 under everyone else then I would say yes raise it! Regardless, I think most people expect at least a 2-3% increase each year to account for inflation (Not enough to make someone move). I used to work for Equity Residential (Sam Zell’s company) and it was a 316 unit apartment complex and we would raise rents every year based on a software program. If the tenant said anything we would usually waive the rent increase to keep them loyal. Funny thing is if you raise rents and someone complains and you offer to keep theirs the same they will be more loyal then before and if they don’t say anything then follow through and raise rents. I remember I went to a management meeting and if they had a property at 98% occupancy they said that was too high and they needed to raise rents to get it down to 95% so it all depends on your business model. In short, I would say YES, raise rents. Again, though you should research your city/state restrictions before doing so.

-John

Tyson Luthy · Answer

This question depends a lot on your local market.

If you are charging less than market rent, then you need to compare the increased amount to potential vacancy costs and do what makes sense.

If you can only raise the rent $25/mo ($300/yr) but it takes a month to re-rent it - it may not make sense...

Usually, when the cost of vacancy is equal to the increase in rent, I go another year (if the tenants are good) then up it the next year.

Linval T. · Answer

If there are increased operational costs, then, without a doubt you should raise the rent to pass them on accordingly.

Otherwise, as suggested by others it depends on your level of occupancy and target of increasing property value by forced appreciation, in the absence of inflation and demand for rentals in your area.

Nicholas Crum · Answer

I am in Florida and the area I am in is averaging 8% rent increases. If you are over 90% occupied you should raise. Usually 3-5% people will live with and not put up a fight. I am a property manager for 180 unit multi-family community. The other thought is if you don't want to raise their rent you can increase your rentable items. Example, if they have a pet, charge $10 a month for them to have the pet in the apartment.

Hope this helps.

Justin Whitfield · Answer

Are you 100% occupied? If yes, you should definitely consider it.

If not, I would leave the current tenants' rent the same and rent the vacant units at an increased amount.

You just have to take an educated guess at the reaction of your tenants. If you think it will alienate them and make them move, don't do it.

Account Closed · Answer

Great food for thought. Both my units have leases expiring soon (one in June and one in July). June lady has already said she is moving and I need to spruce up the place before I can rent to another tenant. So I really need the July folk to stay. Just sent an email to my property manager to let her know that the increase I asked her to negotiation is negotiable.

Steve Babiak · Answer

Link to what I suggest:

http://www.biggerpockets.com/forums/52/topics/7724...

Increase Rent?

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