Deciding on whether to raise the rent or not for properties in DE

8 Replies

Hi Guys,

I have a rental property in Wilmington Delaware which is a single family home for $1550 rent. My current tenant wants to renew the lease but says he will pay the original rent. I have new offers from zillow at $1600 plus. Looking at Zillow the average rental in my area is around $1600. What do you guys generally do for tenants now who have stayed for a year and want to renew the lease? I am also concerned on risks on Covid and lose the tenant. 

Buyan

I would audit your current tenant: did they maintain the property? did they always pay on time? what is their working situation? What's their financial situation? Then weigh up if an extra 50-100 dollars a month worth the transition?  

@Buyan Thyagarajan .  My policy on raising rents is simple: “Every tenant, every year.”  Don’t let them dictate the terms of your business.  And don’t fear them, or you will go out of business. In my market, I almost look forward to turnover because the market moves faster than annual rent increases!   (I turned a unit this month for $175/mo increase - after doing $75/mo increases the last 2 years on existing tenant! -they’re move was due to military relocation, not rent price).

Your raises don’t have to be extreme, but your actual cost of ownership and maintenance go up every year.  Taxes, Insurance, maintenance, utilities, wear and tear, etc... 

Also, if your in one of the “progressive” markets that are increasing “tenant protections” while limiting your property rights and contract rights, you need to keep it at market rates or you’ll never catch up once they fully institute rent controls.

“I can appreciate your sensitivity to rent costs.  The current market dictates $1600/mo for your home.  Based on the current costs of property taxes, insurance and other costs out of our control, I am able to do $1580 for you, because you’ve been a great tenant and cared for the home. If that doesn’t work for you I’ll need to know by (date) so we can plan accordingly.” 

Originally posted by @Curtis Bidwell :

@Buyan Thyagarajan .  My policy on raising rents is simple: “Every tenant, every year.”  Don’t let them dictate the terms of your business.  And don’t fear them, or you will go out of business. In my market, I almost look forward to turnover because the market moves faster than annual rent increases!   (I turned a unit this month for $175/mo increase - after doing $75/mo increases the last 2 years on existing tenant! -they’re move was due to military relocation, not rent price).

Your raises don’t have to be extreme, but your actual cost of ownership and maintenance go up every year.  Taxes, Insurance, maintenance, utilities, wear and tear, etc... 

Also, if your in one of the “progressive” markets that are increasing “tenant protections” while limiting your property rights and contract rights, you need to keep it at market rates or you’ll never catch up once they fully institute rent controls.

“I can appreciate your sensitivity to rent costs.  The current market dictates $1600/mo for your home.  Based on the current costs of property taxes, insurance and other costs out of our control, I am able to do $1580 for you, because you’ve been a great tenant and cared for the home. If that doesn’t work for you I’ll need to know by (date) so we can plan accordingly.” 

I agree with a lot of what Curtis has to say here but we need more information for context ... Of course we want to increase rents but during a pandemic you're weighing up greater risk all bundled with future uncertainty. A business model that can't be fluid and adapt quickly, to me, is a failing model. I love the quote to increase the rents, go for it, stand firm, and think about.. if a quality paying tenant with a track record would be more valuable than a 50 dollar bump in rents during a pandemic? 

Thanks @Curtis Bidwell @Dominic Marshall @John Erlanger for your valuable input. I sent a message to him at the rent for $1625 for a 2-year lease saying that there are multiple offers for the property at $1650 plus. He agreed to it. How would I know his financial situation? Should I ask him to reapply or how do we evaluate the financial risk? Is there a risk as a landlord I need to consider for a 2-year lease if the tenant does not pay the rent in the middle? 

Originally posted by @Buyan Thyagarajan :

Thanks @Curtis Bidwell @Dominic Marshall @John Erlanger for your valuable input. I sent a message to him at the rent for $1625 for a 2-year lease saying that there are multiple offers for the property at $1650 plus. He agreed to it. How would I know his financial situation? Should I ask him to reapply or how do we evaluate the financial risk? Is there a risk as a landlord I need to consider for a 2-year lease if the tenant does not pay the rent in the middle? 

I don't know your lease or terms but in general, your renewal is a new agreement and you can require new proof of income... not necessary but an option to consider and add into your systems, especially right now. 

 

Originally posted by @Buyan Thyagarajan :

Thanks @Curtis Bidwell @Dominic Marshall @John Erlanger for your valuable input. I sent a message to him at the rent for $1625 for a 2-year lease saying that there are multiple offers for the property at $1650 plus. He agreed to it. How would I know his financial situation? Should I ask him to reapply or how do we evaluate the financial risk? Is there a risk as a landlord I need to consider for a 2-year lease if the tenant does not pay the rent in the middle? 

Part of your lease renewal system must be a form that serves as a tenant information update. Mine is a PDF that is fillable, so each year they only change that which changed, print it, sign and date and then return to me. It becomes an addendum to the new lease.


In these COVID times, you want to know their assets and banking info too, just in case, in addition to employment.