how much to raise rent

Question

Have a rental property in Phoenix metro area. Rents have risen quite a bit in the past 3 years and i have not increased their rent but am considering raising it when it comes up for renewal this spring. How much should I raise the rent ? I'm currently about $120 less than the cheapest rental on the market today but I don't want to freak them out with a huge increase. Any suggestions on what to do ?

George.

Jeff Schneider · Answer

Truth of the matter is they probably don't want to move and would end up paying market rate if they did move. What's fair to you and your business would be to raise rent to comparable properties. If you feel like being compassionate and they're great tenants then you could increase to something that's less than market but gives you some increase. Just remember that no matter how nice they are, they're not going to help you pay for that new AC unit when the time comes.

George Cocokios · Answer

I researched rents in my area using various websites such as zillow, hotpad, Craigslist etc, and was able to determine where current rates are at.  Currently higher than when I wrote the 2 yr lease.

George Cocokios · Answer

Thanks to everyone for their feedback.  I need to raise the rent and will increase closer to market rate/just below.  I see now that I need to make small yearly rent increases to help my business cover costs and to also lessen the sting to my renters thus avoiding huge increases only every now and then.

George

Thomas S. · Answer

That is a difficult question. Since you have been operating a inefficient business a turn around is always difficult. You are presently subsidising your tenants rent out of your pocket to the tune of minimum $120/month and likely more so it is really your decision. Had you raised the rent every year you would have avoided the problem.

If the money does not matter simply make a token raise in rent and be happy you do not need to worry about the money. Otherwise raise it to market and see what they do. If they stay you only lost money for three years and are now caught up till next time. If they decide to leave let them stay at their present rent for 2 months while you find better tenants at market without a vacancy. Win/win.

Samantha Klein · Answer

I always try to think of it this way. If you raise it too much all at once, and they move then you may have a month or two vacancy and turnover costs. If you raise it $50-75 a year, they may stay and if you keep it rented to the same good tenants, returns won't suffer since there's no vacancies.

how much to raise rent

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