​To Raise Rents, or Not To Raise Rents

2 Replies

I have a tenant who's lease is up. I am going to renew for an additional 12 months, but would like to raise rents. He currently pays $1,300/mo. I am planning on raising by $40 (~3%).

The kicker here is that this particular tenant does not get along with my other tenant who lives in the unit next door. He has expressed his hatred towards that tenant multiple times. My concern is that if I try to raise the rents, this tenant, who is an excellent tenant, will move out.

My questions for everyone is the following: Do you think that a 3% increase in rent is enough to drive this tenant away or should I move forward with raising it? I inherited this tenant from a previous owner, and don't want to set a precedent that I am the type of owner who does not raise rents. 

If the tenant moves over $40 when they are already paying $1,300 they are not economically rational. But tenants can get quite emotional about rent increases. I have found it helps to set out how your costs are rising and you have to cover them going forward. The aggravation with the other tenant may or may not be a red herring. If the tenant is truly upset about the other tenant and the other tenant is acting in a way that interferes with peaceful enjoyment of the property then you as a landlord have a duty to intervene and seek some kind of resolution. This is good business sense as well as considerate your tenant. So I would consider acting on this but would separate it from the matter of the rent increase, which I would move forward with.

Of course you should ask yourself how easy it would be to find a new tenant willing to pay $1,300 a month if your present tenant were to walk.

For future reference. I put in all my leases a clause for this specific situation. 

The lease is 12 months, rent will not change during this time, if tenant is asked to renew lease then rents will increase 3% at that time. This sets expectations between yourself and the tenant. 

for this instance, I might be inclined NOT to raise rent. If you have 1 month of turnover it'll eat away any increase in profits you may have. Especially since you say this tenant is good, and you know of some animosity. As Stephen mentioned you may be making the right business decision by raising rents, but tenants don't think in terms of business, emotions will come into play. 

I say take the guaranteed $15,600 (1300x12) over what could potentially be $14,740 (1340x11) or less.