Would you raise the rent?

18 Replies

Tenants have been in place for 7 years and for the most part have been good with regard to paying and following rules. I raised the rent one year ago by $100. (First increase.) Still below market but it's a big place and would be a pain to rehab if they leave.

Tenant texted me on July 7 to let me know her husband  had fallen, broke his arm and had to have surgery. She said she would pay partial rent of $1500 on July 8.

July 8 tenant deposits $1400, saying she had to hold back $100 for FOOD! Both are employed and I am shocked that there seems to be no emergency fund. They don't have money for food?? She says she will let me know when they receive the next check, next week so she can pay the balance of $700.

The thing is, in my attempt to be a better landlord I have already prepared rent increase notices ($50)that I was planning on sending out by July 15. Here I am letting my emotions enter into this decision. Should I still send out the notice?

To further complicate, this is one of two townhouses and I want to keep the rents the same for both so they would both get increase notices. I'm leaning towards sending them anyway.

That's tough, but the timing of the increase could seem insensitive and lose the long-term clients.. You said it needs rehab before you move in new tenants, so the rehab costs on top of the $2,100 vacancy for a month? In my opinion, it doesn't sound worth risking it for $100 a month (between the two townhouses)..

I get that you're supposed to keep emotions out of it and run it like a business, so feelings aside, the risk vs reward doesn't seem worth it.

Originally posted by @Christine Swaidan :

Tenants have been in place for 7 years and for the most part have been good with regard to paying and following rules. I raised the rent one year ago by $100. (First increase.) Still below market but it's a big place and would be a pain to rehab if they leave.

Tenant texted me on July 7 to let me know her husband  had fallen, broke his arm and had to have surgery. She said she would pay partial rent of $1500 on July 8.

July 8 tenant deposits $1400, saying she had to hold back $100 for FOOD! Both are employed and I am shocked that there seems to be no emergency fund. They don't have money for food?? She says she will let me know when they receive the next check, next week so she can pay the balance of $700.

The thing is, in my attempt to be a better landlord I have already prepared rent increase notices ($50)that I was planning on sending out by July 15. Here I am letting my emotions enter into this decision. Should I still send out the notice?

To further complicate, this is one of two townhouses and I want to keep the rents the same for both so they would both get increase notices. I'm leaning towards sending them anyway.

 I think you're going to lose them anyway.  The one having surgery can get state disability, if they're in CA.  

I'd tell her that you're really sorry about their situation, but you will need the full rent paid by the 15th, and you can't allow her to pay late next month.  That hubby should be qualified to get state disability while he recovers.  That you are raising all rents by $50 on all of your properties, and were going to send out the notice on July 15th, and you can give her a break for one month, but that's it.  

Because, in my experience, once they fall behind, they never catch up.  I have personally been in dire straights before, and I never paid my rent late.  I moved if I had to, with proper notice, but I never paid my rent late.  And when a tenant gets in a bind for whatever reason, and starts paying rent late, with stories about someone being unable to work, etc., if you let them get behind, you'll end up having to kick them out - even if it's amiable - and you'll end up using their deposit for rent and have none left for damages.

Honestly, their financial problems are deeper than anything that is your problem, and they are about to make it yours.  You just can't let them.  You can make it look like you care, by mentioning that you'll let them pay by the 15th, and hold off a month on the increase, but you really don't have to do more than that.

I'm just afraid that if you do, they will have had to move anyway, and now you not only have a big place to fix up, but no deposit left to help offset that.

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Doubtful that tenant would move because of  a $50 increase, but you never know.  You could raise the rent $75 and if tenant gets prickly offer to negotiate down to $50.

Sounds like they may be living paycheck to paycheck, but let them figure it out 

If you were going to send the note on the 15th. Send it on the 15th.

You're bigger problem as I see it is them being late this month with the rent. They already told you that they do not have enough money to eat, etc.  In my opinion when a tenant gets behind they never catch up. If I were you I would address that situation ASAP as well. 

I personally don't think I'd raise the rent right now in this case. I would however let them know what comparable units are renting for. I have a long time Tennant that is now about $100 below market rent too. They wanted to go month to month but told them I'd keep the rent the same if they renewed their lease for another year. They agreed.

Are both townhouses identical? I don't see why you can't raise one and not the other. If they are similar units with the same size and finish maybe you can justify it with having them sign a longer lease.

Do you pay for any utilities or garbage? If so maybe you can start to charge these back to help boosts your return.

Now that you know they're a bigger credit risk you should increase their rent to full market, not just by $50. You aren't responsible for the financial decisions of your tenants, treat your real estate like a business.

A tenants personal life situation has no bearing on how a business is operated. If it did every tenant would control their landlord/business investor.

For you to even consider not issuing a planed increase due to your tenants situation shows you lack the business head to maximise your returns and are tending toward operating your business as a social worker. You have showed a management weakness by hesitating and asking the opinion of others that have no business in your business. Weak hobby landlords fear operating their business and professional landlords do not understand the reason for your hesitation. Professional landlords already know your tenants have a plan in mind that will not be impacted by a rent increase.

The rent increase will have zero bearing on whether they stay or go. They have already made their decision. Either they have every intent of paying and staying or they are already on the road to moving/eviction. Most landlords lack the understanding of how people operate.

Have you given them official notice of pay or quit, stupid question I know, of course you have not.

My opinion is your tenants are lying to you, why they have not paid likely has nothing to do with the broken arm. They are headed down a road that may not end well for you. By not fulfilling your responsibilities as a landlord to protect yourself you will end up reacting as opposed to proactively acting.

Send out the quit or pay and the rent increase. Tell them your accountant/lawyer requires it and see how it plays out. Your tenants at this time have the advantage of knowing where they intend to end up , you do not. 

Originally posted by @Thomas S. :

A tenants personal life situation has no bearing on how a business is operated. If it did every tenant would control their landlord/business investor.

For you to even consider not issuing a planed increase due to your tenants situation shows you lack the business head to maximise your returns and are tending toward operating your business as a social worker. You have showed a management weakness by hesitating and asking the opinion of others that have no business in your business. Weak hobby landlords fear operating their business and professional landlords do not understand the reason for your hesitation. Professional landlords already know your tenants have a plan in mind that will not be impacted by a rent increase.

The rent increase will have zero bearing on whether they stay or go. They have already made their decision. Either they have every intent of paying and staying or they are already on the road to moving/eviction. Most landlords lack the understanding of how people operate.

Have you given them official notice of pay or quit, stupid question I know, of course you have not.

My opinion is your tenants are lying to you, why they have not paid likely has nothing to do with the broken arm. They are headed down a road that may not end well for you. By not fulfilling your responsibilities as a landlord to protect yourself you will end up reacting as opposed to proactively acting.

Send out the quit or pay and the rent increase. Tell them your accountant/lawyer requires it and see how it plays out. Your tenants at this time have the advantage of knowing where they intend to end up , you do not. 

 What this made me think of that I wanted to add, is that when you cater to a tenant who has made a mess of their lives, you are also penalizing the good ones.  Some people will go to the food bank or buy tortillas and beans or macaroni and cheese - and pay their rent in full and on time, because that is their priority.  They will never ask for a break.  So, if you give a break to the ones who don't manage their money - you reward them for doing so.

I don't know exactly what your financial situation is, but I know medical bills can be horrible. I once had almost $1,000 per month in Rx co-pays, for several months. How long will he be off work? Will he have something to supplement their income until he goes back to work? If this is just a one time thing and they've been good tenants for 7 years, I'd try to keep them. Your vacancy rate and repair costs every time someone moves out could end up being multiple times the $50 extra per month.

People will probably call me crazy, but here is what I would do if they are as good as some of my tenants. I'd say "I'm sorry to hear about the accident, I hope he has a speedy recovery.… oh I'm glad to hear he'll be back to work next month. How much are you short this month? $300? Ok, well, here is what i can do to help you. I was going to raise the rent on both town homes, but I'd like to help you out. Why don't you give me $400, and the other $300 you can pay in $50 payments every month." People might be think I'm crazy, but I think keeping good tenants is worth the effort.

Yes I think you are crazy as you correctly guessed. Being a landlord is a business and having compassion for individual tenants life issues is not a luxury you can afford. Send them to their church. The church is usually a soft touch for sob stories.

With your approach what will happen is they will stall on paying the $400, that with the $300 you will never see, you lose another month or two rent and finally get an eviction. If not they would be turning down your offer and pay the full amount they owe. A landlord is not a welfare office or a church and is 99.9% of the time the first one screwed when tenants hit hard times. Mitigate your losses do not add to them. That is how landlords get 6 months behind in rent collection. Compassion costs money.

If they are good tenants they would find a way to pay the full amount owing and regain their good tenant status that they flushed down the toilet when they did not pay their full rent.

As I said before I believe these tenants are lying.

Originally posted by @Robert Spencer :

I don't know exactly what your financial situation is, but I know medical bills can be horrible. I once had almost $1,000 per month in Rx co-pays, for several months. How long will he be off work? Will he have something to supplement their income until he goes back to work? If this is just a one time thing and they've been good tenants for 7 years, I'd try to keep them. Your vacancy rate and repair costs every time someone moves out could end up being multiple times the $50 extra per month.

People will probably call me crazy, but here is what I would do if they are as good as some of my tenants. I'd say "I'm sorry to hear about the accident, I hope he has a speedy recovery.… oh I'm glad to hear he'll be back to work next month. How much are you short this month? $300? Ok, well, here is what i can do to help you. I was going to raise the rent on both town homes, but I'd like to help you out. Why don't you give me $400, and the other $300 you can pay in $50 payments every month." People might be think I'm crazy, but I think keeping good tenants is worth the effort.

 Unfortunately, from my experience, if you did this, you'd then notice the new shoes she's wearing, or a fresh tattoo, or an expensive manicure, or new tires on the truck, or they'd blubber thanks without thinking like, "Oh man, you are a lifesaver.  I didn't know what we were going to do after I lost my whole paycheck at the casino....er, I mean......."

I have to agree with what @Sue K. has said.  Yes this is a business; yes it sounds as though your tenants aren't the greatest with money (or they would have savings to pay their food and other bills when an emergency happens), but at the same time if they truly have been great tenants for the past 7 years then the cost to evict, repair and turn over your town home may be a larger expense than this short term snafu.  It should be pretty obvious if he has actually broken his arm.  Medical bills can be crazy, especially if you are not insured and/or financially irresponsible.  You don't want to make their financial mistakes your mess, but is this only a one time thing?  I think you need to evaluate the situation a little more deeply and come to something you can be happy with in the long run.  I would continue with the rent increase.  It is not your fault that market rents go up as well as your carrying costs on the property.  The state isn't going to care if you can pay your increased taxes or not, they will just charge you.  If you are truly below market then you have zero reason to not increase the rents.  And if your two town houses are the same then there's no reason one should be paying less than the other.  Sue said it perfectly, in making them aware of the increase but allowing them a one month grace period.  They will either be moving out because they have dug themselves a financial hole, or they will stay put.  Your rent increase is not going to affect that.  Especially if the same type of unit is renting for more than what they would be paying you anyways.  Best of luck!

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ii don't think you should let yourself get walked on, or help if you can't afford it.  Ultimately only you know enough about your situation to make the decision. Here are some things that I considered in saying what I did.  

1. You are the average of the 5 people you hang out with the most.   (According to Jeffery Taylor from "Mr. landlord", good tenants associate with good tenants)

2. Your rental business is a brand. Brand loyalty is hard to get and easy to keep.  (Read "the Leadership Challenge" or "Good to Great" for the actual studies)

3.  I'd rather risk essientially lending good people $300 (if I can afford it) in their time of need and feel good about myself than risk losing them, by forcing them into a move that will cost more than rent and force a lady and husband with a broken arm to move a bunch of boxes and furniture. 

This all changes for me if they are irresponsible or if they are just trying to take advantage of you.  It also requires that I could afford to help and still be making money.  I net over $800 on a house after expenses and I had a tenant call and say "I'm in the hospital. I had a stroke. Can I pay Friday?"  I said yes and he kept his word.   But I could easily afford it if he flaked out. The other apartments more than paid the expenses. 

I agree with everyone who said that you should run things as a business, but even the biggest of businesses occasionally make charitable donations.  

Thank you all very much for the advice and suggestions. Here's what I have decided to do. 

I will give both units the rent increase as planned. $50 is not going to be a factor in their decision to stay or go. I made a commitment to raise rents a minimal amount every year on all props instead of a larger amount every few years. 

I will give them a chance to make good on the rest of the rent but give a 3 day notice on the 15th. I don't know why I feel bad for them and the mess that they have got themselves into. Character flaw I guess. 

I had a similar situation a year ago with another tenant (before I discovered BP!). He got hurt and was out of work. Girlfriend moved out and his disability was not enough to cover the rent. Single dad. He kept telling me he would get caught up and I kept giving him 3 day notices and wringing my hands. Today he is back at work, fully caught up and has paid his rent early the last two months. (He's getting a rent increase, too!) He continues to thank me for working with him. It was a pain and I would not to that again for him but financially I am better off because I was patient. Sometimes it works out and really, if out tenants could figure out how to manage their money they would be buying their own homes. Because they haven't figured that out we get rich. 

@Robert spencer , only been keeping the books for about a year and a half but have not made any "charitable donations" to any non-paying tenant (over 80 doors) yet. 

@Ashley Schroeder and @ Sue Kelley I will give both units a 60 day notice instead of 30 day. Thanks!

Originally posted by @Christine Swaidan :

Thank you all very much for the advice and suggestions. Here's what I have decided to do. 

I will give both units the rent increase as planned. $50 is not going to be a factor in their decision to stay or go. I made a commitment to raise rents a minimal amount every year on all props instead of a larger amount every few years. 

I will give them a chance to make good on the rest of the rent but give a 3 day notice on the 15th. I don't know why I feel bad for them and the mess that they have got themselves into. Character flaw I guess. 

I had a similar situation a year ago with another tenant (before I discovered BP!). He got hurt and was out of work. Girlfriend moved out and his disability was not enough to cover the rent. Single dad. He kept telling me he would get caught up and I kept giving him 3 day notices and wringing my hands. Today he is back at work, fully caught up and has paid his rent early the last two months. (He's getting a rent increase, too!) He continues to thank me for working with him. It was a pain and I would not to that again for him but financially I am better off because I was patient. Sometimes it works out and really, if out tenants could figure out how to manage their money they would be buying their own homes. Because they haven't figured that out we get rich. 

@Robert spencer , only been keeping the books for about a year and a half but have not made any "charitable donations" to any non-paying tenant (over 80 doors) yet. 

@Ashley Schroeder and @ Sue Kelley I will give both units a 60 day notice instead of 30 day. Thanks!

 Your plans sound perfect.

I disagree with you on your idea, though, that tenants somehow may deserve a break because if they could manage their money, they'd buy their own home.  That's really not the case for many tenants.  And even if it was, a tenant who can't afford to buy their own home, is still capable of prioritizing how they spend their income.

Just a little example of how different tenants may choose to spend the same amount of income:

I'm a low income senior now in subsidized senior housing.  Many of my neighbors here make as much money as I do or even more.  But, they spend a great deal of it gambling at the local casino or on cigarettes or going out to the local bars or restaurants, etc., and they can't afford a car because of it, and are always looking for a handout.

Then, there are those like me and many of my neighbors, who don't smoke, or go gambling or go out drinking or to restaurants, and always pay their rent on time, and have savings accounts,  and wouldn't dream of asking for a break.

It's not just because a tenant can't afford to - or doesn't want to - own their own home, that a tenant ends up in a position to ask you to put up with them getting behind on rent.  

And a tenant with good credit that is not maxed out - will still be able to pay the rent without you knowing they're having hard times.

So, really, don't give a tenant a break based on this, is my point.

Plus, many tenants choose to rent rather than buy, even if they can afford to buy.  They like the mobility and prefer to invest in the stock market.  I had many well-off techies rent from me, who chose to rent instead of buy for this reason.  They preferred to invest in the stock market, and wanted to be able to move on quick notice to take a new job wherever.  Not all renters are poor people without choices.