How often do you raise rent?

9 Replies

I own a couple of SFR and I haven't consistently raised rent the last few years. I've readjusted the rents to just under market while vacant. Both are in relatively strong rental markets (Los Angeles, Tucson). As a landlord do you raise the rent every year or do you wait a few years to step up to a new rent? I'm planning on raising the rent on both houses next year when the leases are up for renewal but this would be the first time in 2 or 3 years for each.

@Mike Gordon I try and give some raise every year, if not, your cutting yourself short on cash flow. Unless it’s some weird type of circumstance in your market, rents have consistently went up across the board. It’s always a good thing to check your market rents. If your tenant were to leave, where are they going to go and incur the cost of moving. If you’re worried, do a small amount like $25, but always do something. Remember, your taxes and insurance are Always go up 

Originally posted by @Mike Gordon :

I own a couple of SFR and I haven't consistently raised rent the last few years. I've readjusted the rents to just under market while vacant. Both are in relatively strong rental markets (Los Angeles, Tucson). As a landlord do you raise the rent every year or do you wait a few years to step up to a new rent? I'm planning on raising the rent on both houses next year when the leases are up for renewal but this would be the first time in 2 or 3 years for each.

The cost of life always goes up. Milk, gas, taxes, insurance, lumber, sneakers, etc.

When the lease is up for renewal each year, it includes an automatic 3% increase. This ensures I'm at least keeping up with increased expenses like taxes or insurance. The 3% is disclosed in the lease so the tenant knows about it for an entire year, and then it's easy for them to accept because it's small ($30 for every $1,000 in rent). Any time a tenant complains, I just tell them to shop around for something comparable to see what prices are like and to consider the cost of moving. They never, ever leave because of 3%. 

I reserve larger increases for when a unit turns over and that's when I play catch-up for any big market swings. Now, if the market went really crazy and jumped 20% in three years, my renter would be behind with just a 3% increase each year. But there's nothing stopping me from a larger increase. The 3% is automatic, but I can always bump it higher at renewal if the rent rates really jump. I had a situation recently where the tenant has stayed for many years and was now 12% behind market. I renewed him with the 3% increase but let him know next year will be a complete catch-up. He has an entire year to watch the market, but he's already indicating he knows the rent is low and will stay.

@Mike Gordon I like to give options such as 3% for a 2 year lease, 5% for 1 year, 20% for mtm. This incentivizes less turn over. These are also just examples since every tenant will be different. If I had a tenant that kept signing 2 year leases I would have to do a correction at some point

@Mike Gordon Depends on the tenant and local rent protection law. If you're in an area with a rent increase cap, you better take that % increase every year you can, if you don't you will never catch back up.

We nearly always raise rent every year. The Denver market has been sizzling for nearly a decade and taxes have increased every year, not to mention HOA fees, and insurance rates so passing that on is reasonable. Some of our property owners don't want to raise for good tenants and others will do the bare minimum. However, by and large, we do raise them yearly.

@Mike Gordon I raise them to fit the market. Typically just below the market. Your expenses are not going down, as others have mentioned. At the end of the day you're providing a quality home for your tenet, right? That costs money, and you should make some too... That said, I don't raise rents from about November to February because of the holidays. I, also, try not to have large increases at one time. I'll split up a 100$ increase, if that makes sense.

Like others have said, you have to keep increasing with your operating costs (property taxes, insurance, etc). If rents are climbing, 5-10%. Good tenants will stick around as long as you're just a touch below market and aren't increasing rent too drastically.