Small multi-family building (4 units) self managed. One of the upper units went vacant and needed an update (flooring, paint, etc.). Power tool work began no earlier than 9:30am and finished no later than 6:30pm. Shorter duration on the weekends. This was a large apartment, so it took approximately 3 months to complete working alone and sometimes with a helper (hired help is virtually nonexistent currently in NY). The building is “downtown” – solid C-class. Buildings are about 6 feet apart up and down the block.
Downstairs tenants are relatively “high maintenance” – having 14 service calls and/or requests since moving in July 2020. Oftentimes “tacky tack” stuff, and thus take up a disproportional amount of my time. They pay their rent on time (as everyone should).
Across my portfolio, I typically raise rents every year (approximately 3%ish) – enough to cover my increased expenses but not any increased cash flow. This often does not keep up with market rents, so on a turn I usually bump it up substantially.
These downstairs folks were due for a rent increase on July 1, but I waited until the renovation was done upstairs and made the increase effective September 1. The raise was $20 on their $995 rent, a 2% increase in 14 months. The CPI (which leaves out fuel and food) exceeded 4% over that same period. This is also literally the first time in my career as a landlord (about 100 tenants at this point) that a tenant has questioned a rent increase.
Yesterday I got this email from them:
I do not believe that after what turned from weeks to months of listening to power tools for the majority of our down time, a rent increase is a reasonable request right now.
A postponement of increase until January would be 3 months from the date you provided, roughly the length of construction.
We enjoy this apartment, and arent going to be leaving anytime soon. I dont want to cause conflict over $60, but, this feels like a slap in the face after we were very patient for a long time.
Now, setting aside that extending the increase to December is actually 4 months, here are my thoughts and I want to see what you all collectively think.
First, the renovations and the increase are not at all related. One thing does not have to do with the other from my stance. Living in an apartment building comes with a level of tolerance for the activities of others. When these folks leave for the day and their dog howls the entire time, that’s sometimes to be expected in close quarters (so I think). Or when they smoke in their apartment (a lease violation) and it permeates throughout the building into the other units.
In order for me to provide a safe and well-maintained space for people to live, I must sometimes use power tools to accomplish that. Before these folks moved in, I was in their apartment for weeks - drilling and sawing – not a preferred experience for the other 3 tenants in the building, I am sure. The end result is they got to move in to a clean, updated living space for them to enjoy.
I think the level of service I have provided to them over the year has been higher than what they may receive elsewhere. I have always been professional and responsive, even though some of the concerns they raise are utter minutiae.
The $20 increase is not a “money grab” – my insurance premiums just went up 15%. The cost of goods is way above the incremental raise I am asking for. I could go on.
I believe this is a conversation best had in person, and I will certainly raise all the points I’ve made above when that occurs. I may suggest a delay of onset to October as a gesture of goodwill, but my concern is I am rewarding the behavior of challenging and negotiating my rent increases, and looking for “compensation” for every inconvenience that comes their way. Since this is only $20/mo., I also think this is part of a power play on their part.
To those that are still with me, I hope this was interesting reading. Anyways, your thoughts?
I was going to point out that it is 4 months, not 3. It is a few bucks, I would mention that normally it would have been July 1, so you'd already deferred it for 2 months due to the renos. Offer to do it for another 2 months.
If they are averaging more than 1 service call or request a month, I'd have a talk with them. Are the requests valid (ie is something broken from wear and tear)?
While certainly you do not want an adversarial relationship with a tenant, if you allow them to dictate how you manage your property it may spiral to that relationship and infect your other tenants once they hear they can negotiate rent increases. As you pointed out communal living in a multi-family is going to involve some level of discomfort at times. Discomfort that improves the living condition and property (repairs/maintenance) is different from discomfort that interferes with the peaceful enjoyment of one's living environment (constantly barking dogs). I would not acknowledge the renovation noise if it was not unreasonable or excessive. if it makes it easier you can tell them that you were going to raise the rent to $40 and choose to only do $20.
I would not feel the need to justify a $20 rent increase to my tenants, especially in this market where I know I could get another tenant immediately. Also, if the tenant is even slightly aware of the current rental market, they probably know they are better off paying the $20 increase vs trying to find another place. It's highly likely they're not going to understand (or care) about your business costs. I would not even argue back and forth with them about this.
Time for the "Happiness Clause" as many of the professionals here talk about. Respond very sweetly, and in writing, something along the lines of "It's obvious you are not happy here, and I want my tenants to be happy." Offer to let them out of the lease early with no penalty. If you search "happiness clause" in the search bar you will find many threads on how others have worded this to their tenants. You're not kicking them out, you're "allowing" them to leave early because obviously your place is so horrible in their eyes....
Pretty sure they will drop the argument about the $20, and hopefully quit being so high-maintenance when they realize you're not going to pander to them.
@Wesley W. a bit unfortunate maybe; but they have been high maintenance anyway. I would not allow them to dictate terms; you have been reasonable. If they give in, and they will, hit them with the high maintenance as well. All the best!
Sounds like it is time to let them go (unless they can stomach that crazy increase) and bring that unit up to market rent.
When you start to negotiate the basics of your business--rent amount-- you are going to create a long term problem with these tenants. Some things you can negotiate such as you wanted to put in a new water heater on the day they have a birthday party planned. That you can move to the day before or after the party. But a basic like a rent increase with proper notice should not be negotiated.
I would not explain in detail as they will just counter whatever you say. I would just say that generally rent increases are done on the anniversary of the date the lease started (or whatever your business does) and that you are already later than normal. The rent increase is on the date you stated and you will accept a 30 day notice if they desire to vacate the property prior to the rent increase.
Plus you have no loss if they do leave, they are a maintenance drag.
@Wesley W. Its your business and your investment, not the other way around. You do not need to justify to them the reasoning so do not give them the control.
Tell them "If you don't want to pay you don't have to stay."
The ball's in their court - not yours.
Of course, judging by the summary and their e-mail, if they do decide to stay and pay the new rent expect them to call you every month to fix every little thing.
Hot market, easy to rent these days so finding a new tenant should not be an issue. I know that was a statement but should have been a question. You just did a turn, can you afford another one now or do you need a bit to collect cash before you do the next one?
As everyone above has advised to increase the rent and welcome the tenant to move out, I would advise taking a different stance at least in the beginning by asking yourself what you are prepared to lose over $80. While I agree with you 100% the two do not have anything to do with each other, and agree with most everyone who says you can give them the option to pay or leave and that you already gave them a several months break etc....The question is what are you prepared to lose over $80?.
How much do you lose in a tenant turn / holding costs over $80? Is the price of not backing down worth the tenant turn/holding costs?
Maybe it is, I don't know you at all and maybe the house doesn't need any work and you can turn it without skipping a beat financially. If so, then you have options. You did say the tenant was high maintenance but pay rent on time. So maybe this is a great reason to draw a line in the sand and not back down.
My point is I would think about the consequences to you over $80 and decide what it is really worth to you right now.
Maybe you push back and they agree to stay and pay more. Maybe you push back and they leave. Be mentally and financially prepared for both before you push back.
“I’m sorry but I included a discount for the construction noise in your rent increase… The rent increase should have been $50/mo but I discounted it to $20 because you were so understanding about the construction. If you would rather have a delay in the rent increase until January I can do that instead, but then I will have to use the ‘normal’ rent increase of $50/mo. I’m sorry I didn’t explain it clearly before. This is your notice that rent will stay the same until January when it will increase $50/mo. I am sorry for any confusion…”
All properties differ, without a doubt, but I average about 1 service call per property per year. And 90% of the time it’s a failed appliance.
They complain about such a small %increase yet smoke & you say it permeates through the building. Then they have a dog that howls incessantly. You spent a lot of time & effort on rehabbing an upper apartment that I assume will pay higher mkt rents but get to enjoy the smoking as it permeates through the building & the dog howling.
You need to eliminate this nuisance & then rehab that apartment to gain yet higher mkt rents. We raise ours at least 5% p.a. & if it's due to a vacancy the rents go up significantly.
@Wesley W. are they month to month or on a lease? Is rent market value for the unit? Month to month and market value my answer would be a note saying I am sorry you are unhappy and you don't like the increase I think perhaps it is best if we part ways as it appears you would be happy elsewhere and include notice to terminate. The howling dog, smoking, and the multiple service calls cinch it for me. Year long offer the happy clause.
Let me tell you about a tenant similar to yours who was a pain but I re-signed him at a higher amount as complaints had been decreasing. As soon as I re-signed him, he started complaining about upstairs noise again. I had done multiple interventions carpet on stairs etc. A better closer on the door. It just wouldn't end call after call for piddly stuff. When I again got an email complaint immediately after re-signing him I lost my cool and I thought another year of this! By the time I got to his door I had calmed some and all I said was look I am happy to rip up this lease if you are not happy here but if you are gonna stay I don't want to hear any more about this. He left and my property was so much more peaceful and my stress was less. And my other tenants told me it was a joy to have him gone. They are PIA's and you should have raised rent 3 x to compensate for calls. This is not a negotiation. They are below a vacant unit with some work going on, imagine when they are under a couple or maybe some kids. Some people don't belong in MF buildings. And IMHO you should send a violation on the howling dog and smoking Every time! Good luck
"Downstairs tenants are relatively “high maintenance” – having 14 service calls and/or requests since moving in July 2020. Oftentimes “tacky tack” stuff, and thus take up a disproportional amount of my time."
Use M2M agreements and deal with this stuff immediately.
Increasing their rent after 3 months of construction annoyance, yeah, I think you handled that poorly.
I appreciate everyone's input. For those that were wondering, since these tenants just moved in July 2020, their unit has been updated so they are close to market rent. Also, they have a month-to-month tenancy, but in NY since they have been there between 1-2 years, I need to give 60 days notice to terminate (they need only give me 30).
I think I will reiterate my initial points above with them in person, but ultimately stick to the notice. My gut told me that I was training them to negotiate if I acquiesced, and many of you confirmed that for me. I think the raise is completely reasonable, especially given the level of service they have received this past year.
As some of you have warned, if this increased rate further entitles them to call on more minor issues, I think I'll have the "come to Jesus" meeting with them to either set their expectations more realistically or seek greener pastures. It's a bit of challenge finding good folks for this building given the area, but the long game might be more synergistic.
Agreed with what other are suggesting. It is a business and you own it. Yes, it's a mutual relationship but you've been improving the property to increase the livability and overall quality of life. I think it'd be difficult to find a market right now where there aren't people begging for a unit to live in because of such high demand. If they want to make a big deal out of $20, you should just give them the option to leave and find someone else (I bet they won't leave). Besides, you already mentioned that they aren't really the type of tenants that you'd be happy dealing with for a long time.
Your ball, your court...
...there is no dispute on a rent increase. Tenants don't set pricing, the market does.
I would thank them for their input and advise that the rent will be $(the new amount) starting on the date you chose. And, please advise that all maintenance requests should come via email to you with a photo of the issue going forward.
They've confused "rental" with "relationship" so don't take the bait, don't explain yourself, and don't send that "forget me not boutique." You can make more money but you can't make more time so value your time as much as your money and let them people suck the life out of someone else.
You got this...
If you've had 100+ tenants, how is it that you still care what a tenant thinks of a rent increase???
@Wesley W. Tell the tenant the rent is increasing period! If they don't like it, please provide your move out date.
We have a tenant that move in September 15, 2020 and by January 2021 we had 95 back and forth emails. We're not renewing her lease and she is moving out at the end of August. Good luck!
@Wesley W. I’d raise their rent up to market rent and if they don’t want to pay let them move out. Seems like the tenant is wasting more of your time with excessive service calls. If they move out you’re gaining more time plus more money. Ps: Also look into hiring a property manager so you can alleviate that headache and focus on that next investment.
I'd send back a reply that says:
Perhaps I wasn't clear. I did not send you a request for a rent increase, it was a notification of a rent increase. It has been fourteen months since your last rent increase. We are sorry to now hear that you were disturbed by our renovations, we did try to minimize the noise and be considerate with our work hours. However, this is a multi-family property and work will be required on other units from time to time. Our rent increases are market based and non-negotiable. We hope that you'll stay but if this is a problem for you, we can waive our early termination fees with 60 days notice and your cooperation while we market your unit. Sincerely, Management.
Then I'd be professional and cordial the next time I saw those tenants.
For those that like to monitor outcome, here's what I got this morning after I let them know I would be stopping by to discuss:
It's $60 over the course of 3 months Wesley..
If this needs to continue beyond an email we will just pay it.
If you're half as busy as me you will understand that this is not worth the time or animosity.
I'm debating the depth and nature of my response. It'll be brief, and suggest the happy clause. I'm resisting articulating all the reasons why their email was out of line and that the increase was justified, but I am sure that will come across and defensive.
I am now thinking this might be a case of "keyboard cowboy" syndrome on their part. I had not considered that until now.
@Wesley W. I agree with your logic, the rent increase is irrelevant and separate from the renovation. And to your point if you don’t want to hear sounds from another apartment move to the country and get 100 acres for yourself.
My only question would be the lease situation. Are they on a month to month? Or are they on a lease?
@Wesley W. my experience is that the best tenant/landlord relationship is where both sides value one another.
It seems like that isn't the case on either side here. Assuming you think you can fill quickly, I'd provide notice and move on.
They are right to challenge rent increases, as this tells you they are paying attention.
Regardless of the times service is called, if rents need to go up, they need to go up. I don't care if it's for inflation, your daughters braces, or because you want more cash flow to spend on the ponies!
My daughter had an issue while getting her Masters degree, before she bought her house.
I did all the work, never a service call, never late, and not a pain to the neighbors or anything.
However, hee last year in this place, the rents were raised 3% or a bit more. I told her to complain, and she beat me to it, as she is a money miser.
Landlord thanked her for being a loyal great tenant, and let her know that she was already getting charged less than others with better accommodations. She was free to leave and find a better place, but was assured that in her area, she had a great deal. Landlord also let her know that when she moves, the apartment rent increases by $400 a month to bring it up to going rates.
She signed another lease, and bought a house by the time the lease ran out.
Nothing personal. Just business!
I didn't understand then, but I do now!
Good luck. Add value, charge for it, and eventually get upgraded tenants as a bonus!