Raising Rent - Best Method

11 Replies

Hello BP,

Im reaching out for advice as I am unsure of how to raise rent with my tenant. It's a month to month verbal agreement with a good friend of mine. He pays every month and we've had no issues for the past 7-8 months. Whats the best way to approach this? My goal is to get another $100 per month. Right now the rent is at $750.

@Austin Fox , tell him you're raising rent by $100 and provide the reasons.  Don't over complicate it.

If it's M2M lease, then you're able to increase rents.  That's the risk for the tenants not to be on a long-term lease.  That's also a 10% friends discount you're giving, but would your friend be willing to pay you an additional 10% for a friends discount?  That's how I rationalize any time friends ask for a discount, regardless of product they're selling. 

On a $750 rental, a $100 increase is a big jump.  Just tell him your expenses have increased, assuming that is why you want to increase rent, and give him the appropriate notice.

Check your local laws and your lease as to how much notice you have to give and if there are limits on how much you can increase the rent by.

@Kenny Dahill  Thanks for answering, I never thought of it that way. Its m2m verbal agreement just because we've been friends since forever. I'm going to break the news on October 1st, letting him know that starting next year Jan 1st the rent will increase +100. That gives him 3 months if he wants to move out(which i dont think he will) and I'm not leaving him high and dry

@Theresa Harris thanks for answering, its a month to month verbal agreement because he's been a friend of mine forever. I felt like getting all legal would make things awkward between us. He's a good tenant but expenses have gone up. I'll check my local lease laws though. Idk if that would be in effect since there is no paperwork but still worth looking. Thanks!

Originally posted by @Austin Fox :

@Theresa Harris thanks for answering, its a month to month verbal agreement because he's been a friend of mine forever. I felt like getting all legal would make things awkward between us. He's a good tenant but expenses have gone up. I'll check my local lease laws though. Idk if that would be in effect since there is no paperwork but still worth looking. Thanks!

 There are tenancy laws that apply regardless if you have a written lease or not.  Typically they state you can only increase the rent once per year (12 month period) and usually that happens when you renew the lease.  They also have a minimum amount of notice required to raise the rent (30-90 days). Again you have to follow those even if you don't want to put it in writing.

Personal recommendation: don't ever rent to friends or family. It dramatically increases the likelihood of lost income (as you're experiencing right now) and is very likely going to ruin the relationship. When friends or family ask to rent your property, tell them you have a policy that doesn't allow it and move on.

I believe rent increases should be done quickly and completely. There's no need to make excuses or give them a prolonged explanation. You essentially lost $700 by renting to your buddy and now there's a chance he's going to get mad when you bump the rent, instead of appreciating the break you've given him for seven months.

Tell him you can't afford to rent it below market. Give him 30 days notice and the opportunity to sign a new lease at the new rate or to submit his 30 days notice to vacate.

Tell him that market rate is $750 and that you need to keep up with the market otherwise its charity. Remember that you are running a business not a not for profit organization.