How do I increase rent during this Pandemic?

Question

Good evening all,

Hope everyone is well. I have a duplex and the rent for one unit is very low. This unit is a 3 BR, 1Bath which rents for $1000 to 1200 in this neighborhood. My rent is $750 because of a mistake from my property management for a  16 months lease. My plan was to increase the rent to a least 950 when the leases ends. Now we have Covid19 pandemic and I know things have been hard for many. To the best of my knowledge, my tenant did not loose his job but I'm not sure if I should not renew his lease which will be due for renewal in July and just get a new tenant or should I just increase the rent to 850 for one year lease then 950 for the next year. I'm pretty sure that my tenant will complain about a 100 dollars increase but at the same time I'm loosing hundreds by not doing so. Any suggestion will be appreciated

James Bradin · Answer

This is a similar situation to what I have had to deal with in the past with one of my properties.  I purchased a distressed property and inherited 4 tenants.  It never feels good, in my opinion, to drastically raise rents.  However, you have to realize that you are running a business, not a charity.  If the comps in your area are renting for $300-500 more than you need to think about that fact that you are losing $3600-6000 a year in lost revenue.

I have not had any issues turning over my properties to new tenants during COVID.  Let the tenant know that you are raising rent.  Provide justification why.  If they are a "dream tenant" charge them a little less, if not move on, screen well and find someone that will rent at the actual value.

Gina Nicolas · Answer

Thank you Drew. I really like this strategy

Drew Sygit · Answer

Call tenant and state, "your rent is currently under market as going rent is $x. How much do you think is a fair increase?"

No matter what they say, reply "thanks for that. Is that your final offer or can you do a little better please?"

This negotiation strategy forces them to say a number first and their response will tell you if they are reaonable or you need to get rid of them.

Gina Nicolas · Answer

Thank you for your input. You are right