I have a single family home for rent (3 bed, 2.5 bath), current rate is $1300, the one year lease expires in December. Rent has gone up significantly around here, and assuming no major changes, I'm confident I could rent it for $1500. The current tenants have been good, always pay early and only complain if something needs attention. I was planning to raise them to $1365 (that's 5%) until I realized I could realistically get $1500. Even if they moved out and I lost a month of rent, the new rent would make up for it over 12 months.We haven't discussed if they wanted to stay after the lease expires anyways. If they leave on their own I would list at $1500 (maybe 1550) and either rent or just sell if I get no takers. Assuming they stay, should I just stick with the $1365 to hopefully keep the good tenants, or say too bad it's a business I'm going to 1500?
A good tenant is worth something. If you raised it 5%, yes you'd 'lose' $135 a month. But if you raised it to $1500 and it was vacant for a month, you wouldn't be further ahead at the end of a year.
I reward good (really, really good) tenants by keeping the rent a little below market, but try not to let it get more than 5% below. For your situation, that would be $1425 a month. So I recommend you compromise. Explain the market to them and offer to keep them at $1,400 a month. If they don't want it, you can put it on the market for $1,500 and find someone else.
@Bill Ward January is not a good month for a vacancy in my area. For me, the 5% bump would be my choice. Often the bigger gaps occur if I have neglected to raise the rent annually.
Thanks @Bjorn Ahlblad that's probably what I'll do. I'll keep watching the market. I'm in a military town and there's no shortage of military looking for a close house and they get that housing allowance. There's only a few rentals in the city available now, they go quick, and they are priced 1300-1700 for 3 beds. I had it empty last November during turnover and had no issues finding renters to move in December.
People always say they can get this and that.
Be greedy and find new tenants after the old tenants leave, and you need to repaint and fix the stuff they are not bothering you about.
Or, raise the lease 3% and keep these tenants.
Greed is a wonderful thing. It has a nasty back swing if you don't manage it.
I am lucky my tenants have been paying through this covid charade. No increases for my guys, as I let them know I am waiting another year before rates go up.
Originally posted by @Bill Ward :
or say too bad it's a business I'm going to 1500?
And there is your answer....maybe discount it 5%. It never fails to amaze me how many people come on here with a BUSINESS and then do not run it like a business.....
Can't remember which pod, but there was an interview where the gentleman said he shows his tenants the rents in the area, and then asks them what he thinks their rents should be... may be a strategy you use here to show your tenants you are being fair/reasonable. Good luck!