"Shouldn't Landlords Feel Guilty about raising rent?"

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"Shouldn't Landlords Feel Guilty about raising rent?"

Tyler RowlandBusiness Member
Lender · Cedar City, UT · Member since 2017 · 88 posts · 64 votes

I was talking about Real Estate Investing with some people at Home Show event, and as I was talking about getting rents up to market rates. A lady in the conversation asked me if I felt guilty about that (raising rents to market value).  Almost as if rents should stay the same forever.  

I told her "of course I don't feel guilty, because I try to do everything in the correct way.  And as someone that provides housing and services to people that need them, I feel quite the opposite."  But the thing that really got me about the question she posed was that potentially, there are a lot of people out there that feel it is shameful to raise rents and therefore something to feel guilty about.  How have/would you answer her question.  And how does that perception get corrected?  How do Landlords/ Property Management Companies help your tenants understand incremental rent increases, especially when rents are well below market averages?  

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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
6y

Just ask , " Does the government feel guilty when they raise taxes?"

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  • Dave Rav
    Summerville, SC · Member since 2018 · 588 posts · 252 votes
    6y

    Multiple easy answers to that question.  Take your pick!

    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Tyler Rowland:

    I was talking about Real Estate Investing with some people at Home Show event, and as I was talking about getting rents up to market rates. A lady in the conversation asked me if I felt guilty about that (raising rents to market value).  Almost as if rents should stay the same forever.  

    I told her "of course I don't feel guilty, because I try to do everything in the correct way.  And as someone that provides housing and services to people that need them, I feel quite the opposite."  But the thing that really got me about the question she posed was that potentially, there are a lot of people out there that feel it is shameful to raise rents and therefore something to feel guilty about.  How have/would you answer her question.  And how does that perception get corrected?  How do Landlords/ Property Management Companies help your tenants understand incremental rent increases, especially when rents are well below market averages?  

    Bleeding hearts man. They love spending everyone else's money when they get the feels about something. As soon as it's their money on the line they change their tone real quick.

    3Reply
  • Nick Rutkowski
    Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    @Tyler Rowland

    I don’t think your local government feels bad increasing your property taxes. Why should you feel bad raising the rents to market level?

    1Reply
  • Mark Johnson
    Accountant · Portland, OR · Member since 2019 · 2 posts · 2 votes
    6y

    @Tyler Rowland I am friends with the world's nicest landlord right now. He keeps his rents below market, maintains his property nicely, and even sets out patio furniture for tenant use.

    Everyone still hates him. I can confirm this because I actually live in his building and hear the comments people make. The lesson here is that you shouldn't bother trying to be loved and appreciated as a landlord.

    Simply explain to your tenants: "Regrettably, inflation is driving up rents a little each year". That is a true statement, so no need to feel guilty. Just keep your rent increases around 3%. When tenants vacate, fix the unit and try to rent for as much as possible. If someone agrees to that rent, you'll have nothing to feel guilty about.

    Best of luck!

    2Reply
  • Russell Holmes
    Real Estate Broker · Apopka, FL · Member since 2017 · 492 posts · 528 votes
    6y

    I have known a few "lifelong renters" who have never and will never own a home. They make enough money to have bought something modest years ago, but they "ain't rich" so they "have to rent". Forget low down owner occupied loans or for heaven's sake saving some money over time, no time to bother themselves with that nonsense. That paycheck to paycheck hustle is strong.... Several times in passing I've heard people mention how much their landlord "makes" as the collective total of rent paid. $1,000/mo means their landlord makes $12k per year "from them". When asked "what about expenses?" They'll laugh and assure me they pay the utility bills so there are none for the landlord.....ugh. I honestly think there's a large portion of the renter population who, having never planned to buy a home, have never once considered what goes into owning one. Property taxes, insurance, reserves, maintenance costs are all foreign concepts. Apartment syndication, commercial loans, 1031 exchange might as well be quantum physics. When something breaks, they feel the landlord should simply peel a few hundreds off the stack of gross rents and still be rolling in money. Of course they don't assume part of their rent is set aside in advance for that, they don't plan ahead why would a landlord? I once even got into an infuriating back and forth on a local Facebook group to a homeowner who claimed renters were ruining the city because they don't pay property tax. Like it's a free pass. Myself and a few other folks with common sense explained that property tax, maintenance, etc etc ARE included in rent and paid by the owner. If there's an HOA, the owner is held to the bylaws same as everyone. They just weren't grasping the concept...at all. Beyond all of those hard costs that any homeowner would grasp, I don't think many renters consider that most investment properties carry leverage of some kind. They think all landlords plop down their stack of cash (from other gross rents of course, not prior good financial choices) and buy every property outright. It's the us vs them rich/poor concept that keeps so many people from even considering anything beyond hourly work. Which circles back to the concept that gross rent = gross profit, period. I like some of the eloquent responses and may try them, but I think oftentimes renters are renters because they have never once considered what goes into owning a property since they don't have any interest in doing so. I think I'd try to educate them a little and then simply move along :)

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Terrell Garren:

    About as guilty as the utilities, Internet service providers and Apple feel.  I wish Home Depot and Walmart had to let people walk out the door with stuff without paying, have to serve notice, wait 30 days, show up in court to MAYBE get their stuff back.

    Just follow lumber prices.. 

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    3Reply
  • Ray A Delfi
    Rental Property Investor · Poughkeepsie, NY (Hudson Valley Area) · Member since 2019 · 188 posts · 102 votes
    6y

    @Tyler Rowland a lot has been said in this post but I wanted to share that increasing the rent and also adding value to the property is the ethical way to go for both the market and the interests of the property. The opposing less ethical landlords that raise rent and don’t maintain the property or add value are the ones that should feel guilty if they had a conscience.

    4Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    No.

    But I do think tenants should feel guilty for being contemptuous.

    2Reply
  • Kenneth Mooney
    Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
    6y

    @Tyler Rowland as to the why do people feel that way and how many of them out there are there I’d prescribe to Jim Rohn’s philosophy of “I wouldn’t sign up for that class”. Meaning people are the way people are and there are some things you’ll just never understand. You’re often better off not even trying to figure certain things out because the energy it takes is just so exhausting.

    As for should you feel guilty? Heck no, it’s an investment and the ultimate goal is to make money. As long as you’re doing the right thing, bring it to where you feel is best for you from an investment perspective.

    2Reply
  • Bryan MitchellPro Member
    Rental Property Investor · Columbus, GA · Member since 2016 · 634 posts · 337 votes
    6y

    @Todd Rasmussen

    While rent control sounds great in theory to some, we could also look how much the city/county/state is charging in taxes. I’ve seen huge discrepancies in taxes over many cities around the country and places in Europe as well. Like any business, owners have to consider their expenses. So, when taxes and insurance are being raised, you’ll have to raises in concert. Question: Is there a better more efficient way for a city to encourage the availability of affordable housing? Maybe, but politics aside, market factors will dictate where an entrepreneur invests their money. If not residential real estate, then they will move their money elsewhere. If this happens, I’m pretty sure property values will drop. When they do, income from taxes drop. The government will look for other streams of “income” to fund their activities.

    Back to raising rents, I’ll raise rents to just below market rents while providing the best accommodations I can provide. I’ve made a few good decisions over the last 30 years that have put me in a better financial position than 99% of my tenants. I’m sacrificed, paid the price, and profited In many ways. As such, I can will make money while providing safe affordable housing.

    1Reply
  • Kris L.
    San Antonio, TX · Member since 2019 · 930 posts · 836 votes
    6y

    @Tyler Rowland

    I don’t feel any more guilty than the government does raising property taxes

    1Reply
  • Nicholas Darracq
    Carlsbad, CA · Member since 2018 · 24 posts · 50 votes
    6y

    High rents don't always translate to high landlord profits. Tenants don't know their landlord's costs including mortgage, property taxes, insurance, repairs, vacancy, PM fees, etc. and therefore don't know their landlords profit margins.  Proclamations of greed are rooted solely in ignorance. 

    2Reply
  • Syed H.
    Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes
    6y

    I’ll happily keep my rents low if the government keeps my taxes low, utility costs low, labor cost low and my debt cost low. When they get that down, I’ll feel bad about raising rent. 

    Even now I do keep most of my tenants below market for 2 reasons: good tenants and low vacancy. I’d rather have less headaches and not fully maximize my rent potential. 

    2Reply
  • Michael King
    Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
    6y

    I'm in the process of buying a 4 plex. In the last 4 years, property tax has increased 58% on that property. So an increase in rent of 3% will make me an instant millionaire. 

    I'm not running a charity. 

    2Reply
  • Ryan Proffit
    Saint Joseph, MO · Member since 2018 · 401 posts · 244 votes
    6y

    @Tyler Rowland I would feel guilty if I couldn’t pay my mortgage because rents were too low.

    3Reply
  • Sally FairchildPro Member
    Investor · Newport Beach, CA · Member since 2016 · 106 posts · 84 votes
    6y

    @Tyler Rowland

    My brother, who is a much better business person then me, said it best. He raises the rents every year. He asked me. When you don’t raise the rents every year and then raise them to market rates, do your tenants say, “Thank you for not raising the rents every year and saving me all that money over the years?” Nope, they don’t. They just look it as the greedy landlord keeping gouging the tenant.

    7Reply
  • Ron Fletcher
    Leclaire, IA · Member since 2016 · 161 posts · 130 votes
    6y

    @Tyler Rowland

    I provide a business service. My rentals are clean, safe and I respond to maintenance issues promptly. I am entitled to a compensation for that just as any other business would. Additionally, it is a fair market because anyone who looks at one of my units is not under obligation to rent from me. If they find what they perceive as a better rent value than that is their choice. It’s called free-market capitalism.

    4Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y
    Originally posted by @Mary M.:

    Ummmmmm.... ok.  Isnt your Governor the one that is working to bring something like 200,000 new units online before 2025? This is a HUGE amount of money (billions) 

    And from where I sit I see plenty of stuff coming out of the ground.  Sadly, given prices not much of it is affordable. 

    The renovation craze has really pushed a lot of low income people into the streets and they start yelling as There have been many many people who bought assets, doubled rents or booted all the tenants. While there is plenty of blame to go around, that kind of visible and obnoxius behaviour ends up hurting every other landlord.

    I am not for rent control at all, but I do think we all should try to understand the ramifications of every action we take 

     I do not see your points.

    Someone moves out.  The place is renovated helping to gentrify/improve the neighborhood, someone else moves into a nicer place.  Net housing is even but the area is lifted by the renovation avoiding blight.  LL cannot renovate without passing on the costs.  Without renovation, the housing would age and deteriorate.

    In coastal Ca, a financed market purchase of a small unit count rental property is cash flow negative at market rental rate.  So a LL is already subsidizing the tenants at purchase.  If the LL charges below market rent, then they are subsidizing even more of the rent.  The only way this can change is the cost to purchase the RE goes down or the rents go up.  The rents being low with respect to RE purchase price is why the market rents keep increasing (it is market economics).  

    I am very proud of the renovations that we do.  Our renovations are consistently above expected quality for the area.  Our post renovation/refinance cash flow is typically similar to our cash flow prior to the renovation.  The rents have risen on par with the increase in RE value resulting in virtually zero increase in cash flow.  I would hope no one expects us to renovate to result in worse cash flow than prior to the renovation.  No one would renovate under those conditions.


    0Reply
  • Account Closed
    Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes
    6y

    I don’t feel guilty at all.  This is a business and I’m here to turn a profit, however small or large. 

    That being said I also make it a win win for myself and the tenant.  If for instance I have a empty unit, I turn it for rent, and than rent it at market rent.  If that tenant moves in and a year later the market rent went up 50 dollars I will up it 25 dollars and show the tenant the local area and that staying in their current unit is a cost saver for them which in turn makes it a cost saver for me.  But once that tenant moves out than I bump the rent to market rent again.

     I’m here to make money over time and for me this has worked and until that changes I won’t change the tactic.  

    1Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    6y

    Just say "no".

    “Consider how hard it is to change yourself and you'll understand what little chance you have in trying to change others. ” ― Jacob M. Braude

    5Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    6y

    @Tyler Rowland

    I would charge twice as much if I could. Why wouldn’t I?! The market decides. The tenant is free to move. As a matter of fact, one of my tenants recently broke her lease and did move. And judging by her attitude, she sure didn’t feel bad about it.

    I run a business. To ask me if I feel bad about raising rents is an ignorant question, and doesn’t deserve an answer.

    2Reply
  • Mary M.
    Rental Property Investor · Portland OR · Member since 2018 · 2k+ posts · 3k+ votes
    6y

    @Dan H. you missed my point, but fwiw i dont have an issue with renovating and keeping assets in good condition. 

    My comment was that people get upset when they are evicted so LL can “bring the unit to market rent” or have their rent raised by 50-100% or more. 

    These types of actions is what brings rent control. And as I said - i am not for rent control at all. I have seen what it has done in the Bay Area 

    1Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    6y

    As a landlord with 11 years experience, I think rents where I live (SW Ohio) are an incredible bargain for my tenants.  The property tax man takes two months rent for himself with no capital outlay, the insurance man another month or so.  Capital repairs are nuts, even with my newly remodeled homes (it seem made in China Frigidaire Gallery appliances last about 3 years on average. Throw in an occasional roof, water heater, furnace and $900 for a 3 bed 1 bath house seems like the bargain of the century.  Forget interest as I pay cash.  Still tough.  Think rents are too high, buy your own home. You'll rethink it pretty quickly.

    4Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    6y

    About 5 years ago I purchased an 1800 square foot 3 bed two bath home with detached garage.  Tenants in place paid $450 a month rent.  Tried to let them know they were under market by at least half.  Raised there rent by $50 after three months notice.  They still moved out.  Absolutely no clue.  After a light rehab its rented for $930.00. Most tenants don't have a freaking clue.

    0Reply
  • Dave Chow
    Investor · CA · Member since 2017 · 91 posts · 16 votes
    6y

    When the property tax goes up, and insurance goes up and city adds rental inspection fees , do they feel guilty ? 

    1Reply
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