What is the best way to increase rent on a good tenant

2 Replies

I currently have a good tenant, but believe the rent is at least $100 less than similar properties in the area.  I have heard from one source to slightly increase rent every year lease.  I have also heard that if you have a good tenant, to keep rent the same for 3 years and give 6 month notice that you will increase to recommended amount.

How much under market is that $100? The cost of turnover could be higher than giving them a minimal break. I like to do around 3% per anum. I don't want to run off great tenants for a few bucks--you never know if the replacement tenants will be better or worse.

@Sam King The best way to increase rent is to have it outlined in the lease in the first place before they sign the first lease letting them know that every time the lease renews that there will be an increase in rent at least (whatever your percentage that you choose).  This helps set expectations beforehand which then lowers frustration levels.  

I have a commercial building in Mesa, Arizona with 2 year leases on tenants and I raise the rents 3% every two years.  It is a fairly small increase but it really is necessary unless I want to go down in cash flow every year with the increases in the cost of running and managing the property.

The second best way would be to let them know a couple of months before the lease is up how much you have appreciated having them in the property.  And that because you have appreciated the way they have taken care of the property that you are only going to adjust the lease to the minimum increase which covers the costs of the inflationary expenses of the property.

That being said, It is probably a good idea to check market rents to see where you are at compared to other rents.  It may be worth being a little under the average rent if you have a good tenant that takes care of the property especially going into winter months where its harder to fill a rental in many areas.

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