How do you decide on rent for renewals?

Question

Seems like rent has risen significantly.  Properties nearby that used to rent for $1800 a month are now asking $2400.  One is asking $2750.  I don't know if they are actually getting that but that's what they are asking.

My current tenant pays $1700.  I am up for renewal in 75 days on this property.

Trying to decide how much to raise the renewal rent.

This tenant has been relative trouble free.

Advice?

Geoffrey Murphy · Answer

@George Paiva - Great point. Too many headaches after a while.

Great post so far guys!

George Paiva · Answer

All great points so far.  In addition if this is just a psychological rent increase meaning hell my neighbors are charging x rent in addition to me why not charge more rent.   If your rents are paying all expenses why not just a small increase of say $20?  This way you are inching toward increases but not slapping a good tenant in the face.

Also when I do rentals and they move in outside of the first of the month I just prorate the rent so they pay on the first.  Too many headaches trying to figure out who pays on what day.

Robert Brubaker · Answer

Sam-   I didn't  hear you talk about the need to

consider increased costs as a factor for raising the

rent or any improvements you have made for added

value. A rent increase plus,charges to increase the

deposits,plus "after-thought" prorations, could very well

be percieved  by the tenant as moves to have them

not renew. Continuity of income and stability of the tenancy

are factors to consider too -  "handle with care".

Jerry W. · Answer

@Sam Leon , do you have just one rental or several?  If you have lots of rentals my focus would be on avoiding headaches and keeping the best renters.  If you only have 1 or 2 raising the rent may not be as much of a problem as you have the time to interview new renters, do the few fixups you always do with renters moving out, etc.  I have started trying to get the better renters by buying nicer houses with lower cash returns so I have to deal with fewer problems.  I actually lowered rent for 1 long term renter just to keep her.  When she finally bought her own house (after 12 years of renting from me) and I inspected the rental, I could tell when she cleaned she even took the drawers out of the cabinets and washed them.  Do not lose tenants like that.

Phillip Dwyer · Answer

Sorry I didn't see your additional questions till now.  If you plan on jacking up the rent a good amount, I think it would go over more smoothly with a free proration to the first of the month due date change.  I wouldn't change the deposits.

Sam Leon · Answer

Thanks.

I am drawing up a new lease right now, and have a couple of additional questions.

When the tenant initially moved in, he paid 3 month's worth of rent - first month, last month and security.

Therefore if he does not renew, he does not need to pay last month's rent, and the security deposit is returned to him after I deduct damages.

If he does renew, and I wish to raise the rent say $100, how would I handle the originally held security deposit and last month rent?  Should I charge an added $200 so that the deposit and last month rent are raised to the current rent amount, or leave them be?  Doesn't matter to me either way but seems that raising to the current rate is a cleaner approach?

I need to add some verbage somewhere to say the deposit and last month rent are transferred to this new lease.  Anyone has any standard verbage that I can use?

Now this one is a bit confusing.  The tenant started the lease term on the 19th of the month, and when we signed the lease it was the 19th of each month the rent is due.  This caused some problems.  Sometimes we get late rent because the tenant forgot.  I would like to move it to the 1st of the month, which means I somehow need to prorate an amount from the 19th to the end of the month which would be an odd amount.  How should I write that into the lease?  Or is it typical to just let it slide and not collect for those 10 days?

Al Williamson · Answer

I agree with @Phillip Dwyer you want to reward good behavior. Now you can do some quick breakeven math to see if it will be profitable to adjust to market rates after you assume a range for your vacancy period. Pick a high and low estimate for vacancy (assuming your tenant moved out) and assume a high and low number for getting the unit rent ready.

This would be a good exercise no matter which direction you chose.

How do you decide on rent for renewals?

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