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General Landlording & Rental Properties

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John C
  • Real Estate Investor
  • SouthCentral, IA
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Raise Rent Letter

John C
  • Real Estate Investor
  • SouthCentral, IA
Posted Apr 5 2011, 00:11

What is the best and most polite way to word this letter to get the rent and keep the tenant??

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Jack Anderson
  • King Of Prussia, PA
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Jack Anderson
  • King Of Prussia, PA
Replied Jan 9 2012, 13:19

This is obviously going to be a sticky situation because no one wants to hear they are going to have to pay more money to live somewhere. But, if you are gracious about it and make sure to explain yourself, then you should not have a huge problem. Everyone is aware that the economy is not in its best condition. A good idea would be to show comparisons of other places to show that they are raising their prices or cost more money, etc. That way, your tenants will know that they are still living somewhere with the best deal. Be open to questions with them and let them know they can contact you. The nicer you are, the nicer they will be to you. Just act understanding of what they have to say, but make sure they understand you as well. Good luck! Also, don't get discouraged if some people decide to leave because chances are someone else will come to fill their spot.

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David Lopez
  • NORTHRIDGE
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David Lopez
  • NORTHRIDGE
Replied Jan 14 2012, 09:20

Thanks everyone.

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Joel Owens
  • Real Estate Broker
  • Canton, GA
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Joel Owens
  • Real Estate Broker
  • Canton, GA
ModeratorReplied Jan 14 2012, 14:17

I have a bunch of tenants.

In relaying rent increases,pursuing late rents,etc. it's all how you convey the message that dictates results.

Now you could say you have a tenant that doesn't listen no matter what.I can respond that in many cases the tenant wasn't screened properly upon signing the lease or you received an inherited tenant from a landlord who you bought the property from.

There is a difference between quality tenants who experience a bump in the road and problem tenants who do not want to pay all the time.

Another factor goes back to qualifying the tenants correctly in the beginning.Making sure they have good jobs so you can garnish wages etc. when evicting and they do not pay.If they have pensions and social security instead of a job they have income but you can't garnish it.

I agree that lost rent can be a killer.

Say you have a tenant where you want to increase 25 bucks a month.The tenant is judgement proof.The tenant has lived there for years.The tenant doesn't care the carpet is older as they made it that way are used to it. Now the tenant finds another rental for 20 less a month than what they are paying now.

They stop paying you to save up for moving costs and deposit.Now you have no rent for that month say 700 for example,then the property needs new carpet and paint which you will spend at least 2k to 3k on among other small items.Then the month you are doing repairs you lose another 700 before it finally rents out.So in the end you have had to put out 2k to 3k and have lost 1,400 for a total of around 5k. At 25 increase a month it would take 200 months to get that money back or almost 17 years!! I am not saying NOT to do rent increases. I am saying it is a case by case basis.

A mistake I made as a landlord is thinking tenants look at rent the same way an owner does.

For instance:

A tenant paying 800 month to month we were going to raise to 820.

The tenant said they can't afford it and it's true because we have looked at pay stubs etc. and they usually have to get charity for full amount along with what they pay(it is an inherited tenant).

They said they wanted to move to cheaper place at 750 a month.All the tenant thought about is costs DAY to DAY and not the fact that the 750 place does not include water,sewer,trash and they would have to put down a deposit and pay moving costs.

When they factor in all of that they will pay much more than 800 a month in cost they are currently paying.The tenant ended up staying and we worked it out but it was my mistake to think the tenant understood soft cost and analyzing the true cost involved.

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David Lopez
  • NORTHRIDGE
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David Lopez
  • NORTHRIDGE
Replied Jan 15 2012, 08:55

Yes Joel. we have to avoid the quick reaction that they have when they view the rental raise notice. They really don't see the total cost to move. Each property has to be looked at as an individual. There are many factors to consider. When i decide to raise the rent i want to make sure i do it fairly.

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Greg B.
  • Homeowner
  • Burleson, TX
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Greg B.
  • Homeowner
  • Burleson, TX
Replied Jan 15 2012, 09:46

I think it says something about the state of rental properties that we are even speaking about how to raise rents. 2-3 years ago I was doing what I could to keep rentals filled. In the last year I successfully raised the rents on all my month to month units. I know this is a local/regional issue but we are doing OK in my area.

My, how the cycles change.

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Teresa F.
  • Residential Real Estate Broker
  • Clinton, MD
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Teresa F.
  • Residential Real Estate Broker
  • Clinton, MD
Replied Jan 15 2012, 10:23

I send an e-mail to my tenants at least sixty days before the end of the lease and ask if they plan to renew. At that time I let them know what the new rent will be (generally 3% increase) and remind them to renew their renter's insurance and send me a copy of their declaration's page.

At initial lease signings I generally tell tenants that there is an annual increase in rent so none of this is unexpected and I do not provide explanations. I've had a few problems but generally, my tenants are long term (3 plus years), responsible, and likeable.
I've never had a tenant not renew because of a rent increase.

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David Lopez
  • NORTHRIDGE
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David Lopez
  • NORTHRIDGE
Replied Jan 15 2012, 11:25

Yes Greg. I agree. Two years ago we were just hanging on to renters. Now a lot more people are renting.

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Marta Paglianni
  • Madrid, Spain, CA
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Marta Paglianni
  • Madrid, Spain, CA
Replied Jul 6 2012, 08:16

Hello all of you I am new here and found your web. I am from Madrid, Spain and lease homes in my country and all over Europe. Please be kind to my English. I feel that many factors are involved in raising the rent. IF you are in a nice area then you must do it if the law says so without feeling guilty. The cost of living goes up just like when prices are higher for supper at a restaurant or a new car the next year. Is all part of the cost of doing business. If you are a good landlord and always on top of fixing things then it should not be a problem. Even with our economical chaos happening to us here and Greece , Italy and the rest of Europe we still raise the rent according to the law. Here in Europe we know that the USA is having tough money issues too and that the gov also bailed out the banks yet rent goes up too. But of course do it with a nice letter. The restaurantes present is a nice touch but I dont think none of that i needed unless finding tenants or keeping them is difficult.
I also dont think is a great idea lying at all like was suggested in here. Is a terrible precedent and morally wrong. Once you lie then you must cover your next and the next steps with other lies until it catches up to you. What would you do next when is time to raise again? What if your tenant ask you to speak to your partner directly? Is all wrong and ugly. Is my experience that HONESTY. Once they find you are lying you got so MUCH TO LOOSE. works much better and is your right to raise it. Tenants do know that things go up, gas, electricidad, cost of living etc and that includes renting.

Abrazos

Marta

"John,

I would not do it in a letter, I would meet with them in person and tell them how upset you are with your partner. Explain that he or she wants to raise their rent 50 bucks per month, and you are furious because they are good people! Then ask them if they can do a 25 dollar increase. Tell them you will go to bat for them to get your partner down a little........I personally do not advocate lying, but this is a good technique. You will leave there a hero and get more money too."

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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
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Steve Babiak
  • Real Estate Investor
  • Audubon, PA
Replied Jul 10 2012, 10:39
Originally posted by Cheryl C.:
Ah, this has reminded me to get out my calendar and check on lease expirations. ...

Program reminder alarms in your cell phone for this purpose. And in your email if it has that capability. Have the alarm notification happen enough in advance so that you can get a letter out with time to spare.

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Aaron Helmholdt
  • Real Estate Investor
  • Jenison, MI
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Aaron Helmholdt
  • Real Estate Investor
  • Jenison, MI
Replied Oct 15 2013, 09:11

I know this is an older post but what excellent ideas! I recently bought a duplex and the current tenant is well below market rents but has been a model tenant for years. I think I will imply some of these strategies here to increase rents slightly.

Thank you BP community!

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Logan Zanki
  • Investor
  • Wilmington, North Carolina
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Logan Zanki
  • Investor
  • Wilmington, North Carolina
Replied Dec 27 2013, 12:10

I purchased a house that has two people paying under the going market rental price.

The one bedroom tenet has been in the house for 24 years and is paying $600 when the going price is $900-$1,000.

I was going to raise the price to $700 because he takes the trash out and is always cleaning up around the property with out me asking him. Plus he's on a fixed income and the unit is not in the best shape.

The two bedroom tenant has been in the house for 8 years and is paying $825 when the rent should be $1,300-$1,500 and I'm paying half of his electric because the hallway lights are hooked to his unit.

The unit needs some work like, new floors and the electric to be looked at. I was planning to increase their rent to $1,000 then start the work on the unit, then in three months raise it again to $1,200 which I would then allow them to sign a year lease.

Has anyone done a large jump in the rents like this before and how did it work out for them? I would also like to see a sample letter to see how I should word mine.

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Tanya F.
  • Rental Property Investor
  • Madison, WI
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Tanya F.
  • Rental Property Investor
  • Madison, WI
Replied Dec 27 2013, 15:39

Logan, you have LED bulbs in the hallway lights, right?

We raised the rent on a 2BR from $800 to $1000, between leases, and left the place open 1 month to work on it. We told the tenant that was the plan- and we knew that we were way under the market rate. The tenant wanted to stay, strictly to take advantage of us (through the low rate). To be fair to ourselves, we told the tenant we would not be renewing, we were planning all this work during the open month, and the new lease would have a significant rent increase. The work we planned needed to be done in the short term, and we weren't so attached to this tenant. Our place is very easily rentable. Your plan should depend on the urgency for you to get in and do the electrical work, and how much you'd like to keep this tenant. Be transparent. If the tenant knows the big picture plan, they can weigh staying on with higher rent, or you can work with them to be flexible ending their lease anytime within a given range.

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Logan Zanki
  • Investor
  • Wilmington, North Carolina
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Logan Zanki
  • Investor
  • Wilmington, North Carolina
Replied Jan 2 2014, 12:40

So heres the letter i've typed up, after reading what everyone else has done on here:

January 2st, 2014

Dear

Thank you for being long term tenants here at ___________. We appreciate that you have decided to stay during the transition from one owner to the next. As you have seen we are working hard to respond to your repairs and to make your stay as comfortable as possible.

A crucial part of maintaining ______________ is the maintenance and purchase of building materials. Unfortunately the costs of maintenance, taxes, insurance, mortgage and future repairs are very costly. In order to keep up with those expenses we will be increasing the rents to just below the fair market rents.

The state of New Jersey requires you to be served a 30 day written notice about any change in your rent. This document is that required notice, but we are giving you a 60 day notice. According to your one year lease that you signed on June 2st, 2012 you agreed to pay $825.00 per month to rent your apartment. Your agreed lease has been fulfilled and according to that same lease the agreement converted to month to month lease.

The Fair market rent for 2 bedroom apartments in North Plainfield range from $1,300-$1,500 a month. We will be raising your rent to $1,300 a month but in stages. As for March 1st 2014 your rent will be $1,050, then June 1st there will be a final raise to $1,300. On June 2nd you will be offered a 12 month lease.

If you do not wish to pay the increased rent you are allowed, by New Jersey law, to vacate the rental unit. If you intend to vacate, the original lease agreement states that you have to provide 30 day written notice of your intent to move.

We do understand that this increase will cause you to consider moving. We also want to emphasize that we consider it an honor to do business with you and would like to continue to do so.

By signing below you acknowledge that you’ve received this notice:

Tenant 1:

Sign:______________________ Date:_______________

Tenant 2:

Sign:______________________ Date:_______________

Landlord:

Sign:______________________ Date:_______________

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Aly W.
  • Investor
  • Middletown, NJ
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Aly W.
  • Investor
  • Middletown, NJ
Replied Jan 2 2014, 13:14

I had a tenant that was paying about $100 less than market rent for a property. After her first year, I notified her of a $50 rent increase. She said she couldn't afford it because she had just put her daughter in private kindergarten, but she understood why I needed to raise the rent and said she would move. She was an excellent tenant, so I asked her if she could manage with a $25 a month increase. She said no. So I decided to keep the rent as-is.

2 months later, she asked if she could install an alarm system, since someone tried to break in. Obviously she could afford a rent increase but had called my bluff. Lesson learned. When she eventually moved out, I had no trouble re-renting the condo for that extra $100.

I just gave a 60 day notice to another excellent, but under market rent, tenant. The rent increase is $35, still nearly $200 under market. They will think about it and let me know. Since they did not give a 60 day notice that they planned on leaving at lease end, I'm fairly sure they'll stay. My only explanation to them was an increase in taxes and expenses. If they choose to leave, the place is in excellent condition and will re-rent quickly at a much higher rent.

@Marta Paglianni is right...everything else goes up - taxes, maintenance fees, repairs, insurance.

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Logan Zanki
  • Investor
  • Wilmington, North Carolina
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Logan Zanki
  • Investor
  • Wilmington, North Carolina
Replied Jan 2 2014, 15:55

Aly,

I not to concern about them moving out, because they were inherited from the previous landlord and they dont take good care of the apartment. The vacancy rate in my town is 3%, so it wouldn't be hard to replace them.

Tanya,

I installed motion sensors in the hallways and every light fixture is using an energy saving bulb.

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Logan Zanki
  • Investor
  • Wilmington, North Carolina
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Logan Zanki
  • Investor
  • Wilmington, North Carolina
Replied Jan 3 2014, 12:49

so..... I presented the letter to my tenant and he didn't want to sign it. What do I do, to show I gave them a notice of the rental increase?

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Dawn Anastasi
Pro Member
  • Rental Property Investor
  • Milwaukee, WI
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Dawn Anastasi
Pro Member
  • Rental Property Investor
  • Milwaukee, WI
Replied Jan 3 2014, 13:00

If the tenant doesn't want to agree to the increase, they have the option of leaving.

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Sam Leon
  • Investor
  • Fort Lauderdale, FL
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Sam Leon
  • Investor
  • Fort Lauderdale, FL
Replied Jan 3 2014, 13:11
Originally posted by @Logan Zanki:
so..... I presented the letter to my tenant and he didn't want to sign it. What do I do, to show I gave them a notice of the rental increase?

Why is it necessary to show you gave them a notice of increase?

They have a lease, that is the only binding agreement between you and your tenants. Until the lease ends you are obligated to rent to them for the amount in the lease, after that, they need to pay what you want to charge to renew, or they can leave.

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Logan Zanki
  • Investor
  • Wilmington, North Carolina
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Logan Zanki
  • Investor
  • Wilmington, North Carolina
Replied Jan 3 2014, 13:36

i thought I was required to legally inform the tenants. I guess I'll have to do a little more homework on my landlord laws in New Jersey. Their lease did expire and now their in a month to month. I gave them a 60 day notice, so we will see what happens. During that ill do more research on my state laws.

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Liam Goble
  • Rental Property Investor
  • State College, PA
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Liam Goble
  • Rental Property Investor
  • State College, PA
Replied Jan 3 2014, 13:55

@Logan Zanki - You should probably check your lease to see how rent increases are handled. In my lease, I specifically state that I need to give the tenants 60 days notice before the increase takes effect.

I inherited some residents from a previous landlord. The previous landlord never increased the rent over a five year period. The unit was rented approximately 30% below market when I purchased the duplex. I immediately wrote a letter explaining the change in terms and the fact that the residents would have to sign a new lease. I met with them, introduced myself and handed them the paperwork and scheduled a time to come back and review the lease agreement and any changes.

They did grumble about it, but even before they signed the new lease (with the new rate), they had sent a check in for their rent at the new rate.

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Marcia Maynard
  • Investor
  • Vancouver, WA
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Marcia Maynard
  • Investor
  • Vancouver, WA
Replied Jan 13 2014, 09:36

The most effective rent raise letter is short and to the point with the option for the tenant to call if they have any concerns. We have a few versions depending on the situation. A raise rent letter is bad news to the tenant and belaboring a landlord's rationale only makes it worse. We choose not to raise rent every year and we do so only if we need to. The tenants know that and respond well when we do need to raise rent, even if we need to make a significant jump in the amount.

Here's my wording:

"It has been well over a year since the last increase in your rent. You may be aware that rental rates have increased significantly in our area during that time. We have experienced increased costs for maintenance, repairs, utilities and taxes. Therefore, we must increase rent for the dwelling you occupy. This notice is given on the date of:______ Effective date of change in rent:_______ New rent: _____. We value you as a tenant. If you feel you have special circumstances that you would like to discuss with us, please call our office."

This letter works every time and no one has ever called us to discuss their "special circumstances." We also give them 60 days notice instead of the required 30 so they can plan better for the adjustment.