What are valid reasons to increase rent on tenants

34 Replies

I have a tenant who is currently paying $650 for a 2 bedroom 1 bath. Their lease is up in April. I noticed their fridge is a bit old and rusted. Would a good bargaining tool to lock them in for another 12 months and increase their rent at the same time by purchasing a ($300-$400) fridge. Increasing their rent by $25-$29 would have that fridge paid back in 12 months. Is this a good bargaining strategy with increasing rent.

I think gradual increases when there are upticks in the market are acceptable. That said, if I have a good tenant then I tend to be conservative with that.  However, if the tenant has been problematic, I always increase based on the higher end of the market rate.  

Even if you only raise $25, always raise every year. A small amount like that won't scare away a good tenant and if they are reasonable they will understand that you cost are going up to...hell, I bet at $25 per month that doesn't even cover your increased cost of insurance, property tax, and other random expenses.

Your tenant will most likely opt to stay if you don’t increase the rents by a large margin, with or without a new fridge. It’s normal to have small yearly rent increases to keep up with rising costs like insurance, taxes and inflation.

I’ve found most tenants will decide to either stay or leave regardless of a (modest) rent increase or not. $25 or $35 isn’t going to make their decision one way or the other.

Same with an upgrade like a fridge. I probably wouldn’t bother unless they’ve asked about it and you’re increasing the rent extra. Many tenants might even say ‘I’ll keep the fridge and keep the rent as-is’, which isn’t what you wanted.

My favorite tenant's lease is up in June. There's no way I'm raising her rent. Seems foolish to mess with a system that isn't broke. She wanted a new fridge as well but took it upon herself to buy her own and put ours in the basement (with our permission). 

If the property is below market, increase the rent. There's no need to justify it to the tenant or buy them off with a new fridge. It doesn't make sense to replace the fridge and then increase rent enough to cover the new fridge. If the fridge works, leave it. If the rent needs to be bumped up, bump it.

@Anthane C. Richie Sr.

Know your market, what are the vacancy rates? What are other units similar to yours being rented for?

The average person isn’t going to move over a $10-20 a month rent increase.

Most businesses have increasing costs as does the RE business. I’m sure your property taxes have increased, the plumber that you use to come out and repair toilets has increased his prices, it only makes sense that the rent have a small increase as well.

Also, when you train tenants this will happen they come to expect it.

Best of luck!

@Anthane C. Richie Sr.

I only have experience being a tenant!

I would be more open to paying more rent for a new fridge. As a tenant, we dont understand and sometimes dont truly care about what it takes for you to manage the property. Mainly we care about how it effects us as a tenant.

If my rent would imcrease for a reason I dont understand then I would assume you are being greedy and would be more open to finding a better place if one shows up for similar price(maybe even more than I pay you).

If you are giving me an explanation as to why you're rising the rent, then I would feel more comfortable with you because of the transparency. This will cause me to stay with you longer just because I am happy with you and feel like i can trust you.

@Anthane C. Richie Sr. Good question. When I used to have a single-family portfolio that I actively managed, I would use techniques like this; however, I would start the conversation with my tenants many months prior to renewal. I would ask my tenant something like "What are 2 or 3 items you would improve, add or upgrade to the home to make it more accommodating to you?" I wouldn't mention anything about renewals or rent increases at that time. To my surprise, the tenants would often come up with something I didn't think of such as "We would add a ceiling fan to the master, or upgrade the outside lighting". You might find that your tenants don't even care about the older fridge and you might be able to get away with replacing cheaper items, at least for the time being. 

I would make a note of these requested items, then bring them up a couple months before renewal and say something like "I appreciate you all very much and I thank you for always paying on time, I remember you mentioned a few items you would like to have and I would like to make those improvements to the house (adding the ceiling fan and upgrading the outside lighting). Please note that the property taxes, insurance and HOA have all increased about 3% since last year (if this is true, of course). The new rental rate starting on ____ will be $30 higher per month as a result. Please let me know if you have any questions and thank you.

If you do not raise the rents then the tenants will be pissed when you finally do. I had a conversation with a friend the other day because her neighbor moved. She is paying $700, next door went up to $850. She said her landlord better not raise her rent because she's been there so long. I explained about cost increased every year for him and the old neighbors destroying the place that costs money to redo for the next people, she said that's his problem not hers and that is the risk he takes owning a building. She has lived there for years and never had an increase, so now she feels like he's never allowed to increase it. If he increased it even $25/month over the last 4 years, he would still be below market rent (market is $900-950) but he would have trained her to expect an increase every year instead of being pissed when it does happen. So even if you only increase it the small amount that your costs go up, increase it. Even if it's $10, do it. Having tenants is like having kids, they need to be trained to expect and not expect certain things for the relationship to work 

@Anthane C. Richie Sr. It’s a very good practice to increase the rent with each new lease. It just gets them used to it. You can also give them a choice between a new lease signing fee of $100.00 or a increase in rent for $20.00 a month. Try to always give tenants choices to choose from. It at least gives them choices and generally doesn’t just get them bitter about feeling like they have no choice in the matter. Keep them tenant happy 😃

@Anthane C. Richie Sr. Bargaining ? No reason to bargain with them they should receive yearly increases to cover the cost of living. I do get them to a max then I no longer do increases. But you don’t need something to justify you’re the owner of the property to me that’s the only bargaining tool you need. You’re the owner they’re the tenant if they don’t like it then they can move. But beware if they move you could have an extended vacancy. Hence I mentioned the max