Investor · Lutz, FL · Member since 2016 · 66 posts · 17 votes
I have heard general rent increase of 3-5% every year if tenants are renewing their lease. However, rents have gone up about 12% since last year in my area. Is it advisable to raise the rent to market rent (or slightly under rent since these are good tenants) or does traditional increase of 3-5% is more reasonable? Whats the recommendation if rents are going up significantly? Thanks for your input.
Investor · Philadelphia, PA · Member since 2017 · 73 posts · 58 votes
9y
I agree. I like to reserve significant rent hikes for when one tenant moves out and a new one moves in. We have had similar rent appreciation here, but I like our tenants so I haven't done any big bumps. Since I self manage (and work full time) that's more important right now.
Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
9y
If they are good tenants then work with them and raise the rents gradually. Would it be worth it to lose them, have to deal with the turnover, and then get stuck with a bad tenant?
Investor · Philadelphia, PA · Member since 2017 · 73 posts · 58 votes
9y
I agree. I like to reserve significant rent hikes for when one tenant moves out and a new one moves in. We have had similar rent appreciation here, but I like our tenants so I haven't done any big bumps. Since I self manage (and work full time) that's more important right now.
Investor · Oxford, MI · Member since 2016 · 110 posts · 41 votes
9y
Imo market rent is market rent. Is a tenant really going to move? They will look and find that they will be paying the same. Now i must admit we have had great tenants under market. Be honest with yourself - are you afraid 'good' tenant will leave or just really loath to turn over the property.
At min at least mail them something that says hey market rent is xxx per month but since your good your rent will be x less per mo.
Rental Property Investor · Oxford, MI · Member since 2013 · 98 posts · 18 votes
9y
I would split the difference bu as Patrick said, at least let them know they are under market. Keep in mind by not being at market you havent forced as much appreciation if that is something you are looking for.
I always advise raising rent to market every year if allowed. Some landlords seem to differentiate between good and bad tenants but to do so would be discrimination. You raise good tenants to market and get rid of bad tenants.
Good tenants, all tenants, expect to pay market so as much as a landlord may think they are making points with tenants by supplementing their rents tenants have zero loyalty to any landlord. It is a one way street. There is no value in charging under market rents.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
I did the 5% and a good friend went for the FMR - - he drew a move-out and I kept my tenants. It's easier to keep a tenant that replace one. Vacancies are my Achilles heel as the property is 120 miles away, so I manage the vacancies, not the FMR. So what if at YE there's a few hundred left unreaped? It never amounts to even one months rent.
Landlords operating at a distance have a very real financial disadvantage. Holding on to bad tenants becomes a financial necessity and is usually results in landlord burn out.
It pays to have a PM when a landlord can not make efficient business decisions due to distance.
Every % lost is not only out of pocket it reduces the value of your property. As your number of doors increase the scale makes maintaining market rent mandatory. For a small investor monthly income is not of primary importance.