tenant complain about rent increase

24 Replies

The first year, I advertise the rent $100 below market rent so that I can fill the place up quick. Indeed, the SFR was filled within a few days.

So, after the first year, the rent is about $125 below market rent, so, I raise the rent by $80. The tenants were pissed and wrote me a note to complain about the stupid rent. Anyway, they still signed the year lease. 

This year, the rent is about $150 below market rent. I only raised by $15, thinking that the tenant will thank me in tears. But, they still wrote me a note scold me for increasing it yearly. 

How do you handle the "tenant scolding" about rent increase??

I would tell them If they don't like it and think they can find something cheaper, by all means they have the ability to do so. I would keep your current pace! Good job on keeping up with market rents.

I would tell the market dictates what the home should rent for. It's not their place to "scold" you. I would let them know that you will raise or lower it every year at lease renewal per the market. If they don't like it feel free not to renew. 

If you find you really can't handle the complaining you could always give the home over to property management.

@Richard Vang . You can't really do anything about it as some people will complain just to see where it will get them. Maybe they think that if they write this note you may just drop the increase and now they get away with the same rent for the next year. From their perspective it doesn't hurt to try. If you are so much below market rents though I would not be concerned and would probably raise rent to be in line with the market considering your property condition supports that. However, if throughout the year they are really great tenants who cause no issues I would just keep on increasing at 3% or so per year to cover new expenses such as taxes/water/sewer.

Hello Richard,

Shrug it off.  They likely just needed to blow off steam.  Encourage them to look around for an apartment and see what they find- it might take that to realize they are getting a deal.  Tenants who fee they are getting a deal are generally easier to deal with!

I usually state what the rent will be if they renew by  certain date (2-3 months before the lease ends) and let them know what the rent will be after that date whether they renew or I am marketing to other tenants.  This way they have a chance to look around and see they are getting a fair deal

Kelly

Thanks everyone for the sharing. 

They are ok tenants. They like to complain. But, luckily just verbal rant. They haven't done anything like late rent or withholding rent as an act of pissed. So, overall still pretty ok tenants.

Because turning over the current place might need another $3K-$5K... that's why I prefer to keep the current tenants. Plus, it might need me at least 2-3 weeks of time/effort to turn over.

Originally posted by @Bryan N. :

How much will a vacancy cost you and turnover costs versus leaving it alone and getting multi year leases out of them?

 I agree.  My point is not to expect gratitude from your tenants.  Don’t make decisions because you want to look like the good guy.  Make them because it makes business sense.  I have tenants who have been with me for years and I bend my rules because they always pay.  

Originally posted by @Richard Vang :

The first year, I advertise the rent $100 below market rent so that I can fill the place up quick. Indeed, the SFR was filled within a few days.

So, after the first year, the rent is about $125 below market rent, so, I raise the rent by $80. The tenants were pissed and wrote me a note to complain about the stupid rent. Anyway, they still signed the year lease. 

This year, the rent is about $150 below market rent. I only raised by $15, thinking that the tenant will thank me in tears. But, they still wrote me a note scold me for increasing it yearly. 

How do you handle the "tenant scolding" about rent increase??

 Ignore the note.  If you're confident you have a good property at below market rent, don't worry at all.  If they move, you'll quickly get a new tenant.

Do not respond to their note at all.

This topic hits very close to home with me. Although I now understand the idea behind rent increases, a year ago I was the angry bitter tenant. From my perspective, I could not understand how my rent could keep going up annually. As I was already struggling financially after my separation, it just seemed like there was no sympathy. It all seemed like a very robotic and inhuman system. As a result, I am now typing this out of a room that is about 10x11. I had to downsize to renting a room out of someone's house. Although I my experience was not a good one, I now have a better understanding as to why rents are raised. Once I get back on track, I hope to start investing in small multi family buildings. The process will probably repeat itself, as I will be perceived as the evil and money hungry landlord. I can understand that there should be no excuses made on behalf of a landlord, when it comes to rent increases. However, knowing what I know now, I do intend to make rent increases very, very clear from the moment a tenant applies. I would even go as far as to devote a full page document explaining the idea behind rent increases, and why they are necessary. Some tenants can't be educated, but for the ones who can be enlightened; it may make the difference between a bitter tenant and a tolerant tenant. I know that many "hard core" landlords may disagree with me on this, but as someone who has been in those shoes, I prefer to be stern with a human approach.

Why would you raise it by a measly $15 a month? That is almost like saying "I am going to raise your rent an insignificant amount... just because I can." For $180 you could have kept the rent the same and not had any wining and not now be viewed as the landlord that raises rent every year. It also would have set you up next year to raise it $100 or $150 a month and they would be much more willing since they might feel that they weren't getting a rate increase every year. 

Either raise it $150 and get to near-market conditions (that's what I would do), or keep it the same while letting them know what a smoking deal they are getting. To me the "juice is not worth the squeeze" for the 3 extra latte's you could get at Starbucks every month. 

I am pro-active in my rent increase letter to avoid this sort of stuff. What I do is I search out what similar nearby rentals that are available are asking, and I establish a range of rents that the tenant will also find should they choose to look. And I include that information in the increase letter. There are also sites that will give you what other similar units have actually rented at so you know the spread between asking and agreed rents. And I emphasize that my new asking rent falls below the rents nearby so they are still getting a good value for their rent dollars.  If I get negative fedback from the tenant, I explain that they can check the market to see if they can do better ...

@Jonathan Godes a $15 increase would make sense for rents say below $800 because that would amount to a roughly 2% or more increase, sort of like cost of living increase. And the lower the rent, the more significant it becomes.  Since we weren't told actual rent, hard to say for certain ...

@Steve Babiak What is the least you have ever raised rent? 

I think that if you are going to go through the pain (hurt feelings of being squeezed every year) and risk (that they leave for another place) you wouldn't wouldn't do it for $15 a month no matter what the rent is currently. If the OP really is $150 below market rate (shame on him), then a bump of $50 still puts him at $100 below fair market value and the place should be a breeze to rent out next time. 

I would also evaluate the rent I am charging relative median salaries of tenants which is generally public information.  As a former tenant, I appreciate landlords who are less concerned about "market" rent, and more concerned about "reasonable" rent.  

Originally posted by @Katie Rogers :

I would also evaluate the rent I am charging relative median salaries of tenants which is generally public information.  As a former tenant, I appreciate landlords who are less concerned about "market" rent, and more concerned about "reasonable" rent.  

 Market rent is reasonable rent, isn't it?  I always thought above market rent was unreasonable. 

What is the difference between "market" and "reasonable"?  I would think that market rent IS reasonable rent.  If I'm way above market (also above "reasonable") Tenants will look somewhere else to live

Randy and Ryan, In a normal, free market world, market rent would have to be reasonable, or landlords would lose to competition.  In communities like mine, the median wage of tenants is $15/hour.  The median rent is $1500.  Therefore,  landlords are charging rent that requires a salary of $25/hour to afford. Meanwhile, landlords say they are doing tenants a favor and charging cheap rent because if they charged rent that would actually give them a positive cash flow, it would be even more.

Originally posted by @Jonathan Godes :

@Steve Babiak What is the least you have ever raised rent? 

...

$18 on a rent of $800. With explanation that specific costs have changed, and the rent survey showing that to be a very reasonable rent still. 

Since I also use an automatic rent escalator clause that bumps by 8%, those small increases seem even more reasonable. And I look like I'm not greedy since I could have insisted on the full 8%. 

I have been trying to target $100 per door per month in profit myself.  Right now I have one duplex earning $175 a door with good tenants.   My property taxes went up because I improved the building and it's an extra $40 a month out of my pocket now.   Now I'm down to $155 a door a month but I am not raising the rent this year.  

In addition to the turnover cost, you have to factor in other unknowns in my opinion.  The new tenants may pay on time, but maybe they love their dance music with a lot of bass.  Or maybe they are a "heavy walker."

Maybe I am too new at this game, but as long as each property is performing to the $100 a door target I have for myself I'm content to keep stable tenants who like their neighbors. I'm focused on finding the next building that yields me my target of $100 per door --- that will make me more money right now than wrestling a stable building for another $20 a door.   I figure when the market shifts and financing is not as affordable for me I can focus on optimization vs acquisitions.

You should raise it to market price and find new tenants if they don't like it. My apartment complex raised rents in Atlanta 5% this year, it's part of renting. You're in the game of real estate to make money. not make your tenants feel good about ripping you off haha.

The only reason I keep the increase low is because of the turnover cost of $3K-$5K. My tenants has perfect credit score and pay on time. They like to verbal complain here and there, but, nothing big drama. I am not afraid they will find a cheaper rent. I am only afraid that the tenant will see that the rate is still low and decided to buy their own house and move. 

The rent is about $1500, the mortgage is around $1100, prop tax $300, utlities $200. 

Sounds like your tenant may be "training" you to keep rent increases to a minimum.   That said, I don't mind being under market by 5% or so, for a very good tenant.