Raising Rent, how much is to much

[Weston Desormeaux]

I bought a lot of SFH rentals a few years a go and on average the rents are 30% under HUD FMR 2022. I have researched local prices and they are comparable to the FMR. Need recommendations on bringing the rent up to match FMR so i can just start keeping it there. Notes and/or current plan below. Please critique and send all ideas.

Current plan

Spread the rent increase up over 3 years.  Go up $150 a month across the board starting in June.  Then 1/2 of remaining the final 2 years. 

New one year lease and rental agreement.

Save 5% of rent for updates. Every March we will review possible updates with the current tenant.

Start using Rentredi to streamline payments, maintenance and communication.

Notes

Some of our Tenants are HUD and will have to coordinate increase with them.

Neighborhood most of the homes are a lower middle class neighborhood in the middle of town.  Neighborhood has increased in value and desirability in the past few years.

Not to worried about people moving out, we usually have our homes rented with in a week.

Questions

Does anyone just follow HUD FMR and match rent to that?

Don't have any idea what I'm doing as far as raising rent, give me the dirty deets?

Thanks, Wes

[Nathan Gesner]

I disagree with incremental increases for two reasons:

1. You will probably get to a point where the tenant won't be able to afford the rent, and they'll leave. Why not get rid of them now and find someone willing to pay market rate immediately?

2. Even if they can afford the full market value, they may start to develop animosity toward you

3. Incremental increases require tracking and increase the odds of misuderstanding

My recommendation is to give the current tenants notice of your intent to terminate their lease. If they ask why, tell them you're renovating (even if you're just cleaning and doing touch-up paint) and then putting it back on the market at a significantly higher rate. If they insist on staying and paying market rate, you have to screen them to verify it's affordable and determine if you want to even keep them. I would only do this if they are really good tenants in every respect.