Raise rent or keep good tenant

8 Replies

I think I already know the answer to this but I just wanted to throw it out there to see what others think.

Assume you have a rental making $1400. Rents have increased over the past year and you could now rent it out for $1500. The current tenant has been there 1 year and has always paid on time. They have maintained the property and kept it in good condition. You hear very little from them. They want to stay several more years.

Do you kick them out and put it on the market for $1500 or do you sign a 1, maybe 2 year extension?

No, I wouldn't because you risk losing a good, paying tenant with little to or no complaints as well as having the property vacant which opens the property up to vandalism, break-ins as well as squatters.

I would give them the option of extending 1 or 2 years maybe with a slight increase but not $100 increase.

Is the only option this "either-or" approach? Can you split the difference at $1450 and keep your good tenant?

What does your average $1400/mo tenant cost you per year (assuming you have enough data to sample)? If your average tenant lives there two years and it costs $1000 to turn the place over, that's $5K over a 10 year period. If your good tenant lives there 10 years and you turn the place over once for him, you've saved $4K in turnover costs. At $100/mo rent difference, that's good for 40 months. Perhaps there's a way to bring his rent up a bit slower but enough such that, at the end of our fictional 10 year period, you haven't lost money and had the benefit of a good tenant for those 10 years?

Good luck -

Mike

I would leave a tenant who always pays on time and never complains alone for now. That $100/month could easily cost you more if you have a vacancy or have a new tenant who damages stuff (or complains a lot.... hassle).

I would leave them alone a year. Then re-decide what to do and increase rent a little. $100 a month can be a lot to a tenant.

Yeah that was pretty much my thinking too. I'm glad we're all on the same page. The tenant has agreed to $1425 and offered to sign a 2 year lease. I'll take it and a 1 year lease for reasons that have been covered here in other threads.

You made the right call. If that unit would have sat empty for any length of time, even a month for turnover assuming you wouldn't put a penny into it for maintenance, you came out way ahead.

I haven't raised the rent on one of my $1,200/month tenants and they are on their fifth year and never had a single problem with them. To me a long term tenant is worth more than that extra $100/month and a headache.

Originally posted by Robert Steele:
I think I already know the answer to this but I just wanted to throw it out there to see what others think.

Assume you have a rental making $1400. Rents have increased over the past year and you could now rent it out for $1500. The current tenant has been there 1 year and has always paid on time. They have maintained the property and kept it in good condition. You hear very little from them. They want to stay several more years.

Do you kick them out and put it on the market for $1500 or do you sign a 1, maybe 2 year extension?

IF Several=5
THEN $84,000.00

@Robert Steele ,
I think that you made a good decision.
You raised the rent $25., it would cost the tenant a lot more than $300 to find and move to another place.

At the end of the one year lease, raise it another $25., unless the rental market deteriorates.

Raymond

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