Raising Rent Woes
Rental Property Investor · Hart, MI · Member since 2018 · 89 posts · 29 votes
I’m buying properties that were owned by tired landlords who never raised rents. For the most part, tenants aren't complaining about it because I do it slowly and give them lots of warning. Of course, I still get tenants who are barely making ends meet as it is and they can’t afford the increased rent, whether it’s 30 days from now or a year from now. What’s your strategy for raising rents? Do you tell them your plan or do you raise it over time, only giving them the minimum required time and they either deal with it or move? They expected the rent increases, but they were hounding me for what it would be. So, I gave it to them a curtesy. Since they are complaining anyway, I’m questioning how I should do it in the future.
Every time I raise rents I always give them some market data and then list a few bullet points of maintenace items/improvements I plan to do to the building in the coming year so it doesn’t looks like I’m pocketing all of the profits.
I’ve always found success in that approach with little to no complaints.
This is why it is important to raise rents once a year. It really depends on how much below market they are. Some people don't pay attention with what the market value is for rent unless they are actively looking for a place. I'd give them as much notice as you can. Where some of my rentals are, we have to give them 90 days' notice-in that case I do the 'minimum' because 3 months is plenty of time.
If they complain, tell them to look online and see what a comparable unit is renting for in their area.
Tell them a early as possible to give both of you time to plan. Your goal should be to get the property leased before the tenant moves out.
At the end of the day you're the owner not the tenant. If they want to control there cost of living they would work for it and buy real estate like everyone else. We give our tenants a minimum 60 day notice of rent increase. If the tenant is hundreds of dollars behind market realistically you'll probably never catch them up. Usually it happens at turnovers. That's been my experience working with other investors in similar situations.
Every time I raise rents I always give them some market data and then list a few bullet points of maintenace items/improvements I plan to do to the building in the coming year so it doesn’t looks like I’m pocketing all of the profits.
I’ve always found success in that approach with little to no complaints.
Raising rents shouldn’t be considered a “woe.” It’s one of the best things about owning rental properties. As others have said if you raise rents yearly you won’t find yourself over time losing a lot of money due to rents being too low. Run your rentals as a business.
I include the newest Charlotte Region Rental Report Average Monthly Lease Price 2022 $1,827 2023 $1,956 +7.1% and let them know that my cost increased as well Insurence and and..
Print out comparable properties on Zillow and hand them out when you 'request' a higher rent amount. Some will get it, some won't. But you're not here to make someone's life easier, you're running a business. Do it as gently and fairly as you can , but do it.
@Eric Gerakos - Excellent post......
You don't always need to justify a rent increase. Explosive property values lead to increased property taxes, Insurance and HOA fees increase over time as well. If you pair those things with neighborhood comps illustrating higher rents, the evidence is there to base a rent increase off of. We have some owners that feel bad about raising rent but we tell them that breaking even is not usually the goal for an investor. Follow your lease for guidance on how much notice you give them. If you expect they won't be able to afford the new rent, give them extra time to locate a suitable replacement.
How below market are you?
Make sure you are comparing apples to apples.... your 10 year old never updated or maintained unit is not the same as a newer unit, so be careful how far you push what the true market rent for your unit is.. be realistic.
That being said.... when you are WAY below, the only real option is to make that jump at turnover.... but expect to invest some $$ in getting the unit up to date. Sometimes it best to riop the bandage off and move on..
If they cant afford even a small increase now, they never will and its time for a new tenant
Depends on how below market they are. If the increase is over $150 + tell them as soon as possible. This way they can plan to find something more affordable and actually vacate rather than turning into a holdover or late pay no pay situation. I sometimes give them a copy of the rental comps so they are aware of how under-market they have been. I let them know we must increase to cover expenses such as property tax, insurance, repairs, etc. Once the notice of increase is submitted be prepared for a long list of things that need repair or updating. It is best to let them leave if they have been there a long time and are under the market. You will likely need to do some updating to get market rent.
@Katherine Earle use hard #’s. Rentometer is a great tool to see comps on your rents.
@Katherine Earle use Rentometer and be consistent with increases
@Katherine Earle use Rentometer and be consistent with increases
Raising rents shouldn’t be considered a “woe.” It’s one of the best things about owning rental properties. As others have said if you raise rents yearly you won’t find yourself over time losing a lot of money due to rents being too low. Run your rentals as a business.
Be honest and upfront about your goals and give them plenty of notice so they can make arrangements if they cannot afford it. The more notice the better, and if they leave early for it, you get to raise the rents sooner.
You could also do some of the legwork for them, preparing a list of resources to help them out. Catholic Charities, and other sources of rental assistance; local human service providers; food pantries/meals on wheels, etc.; there are also ageing in place agencies that can provide information and resources that may be helpful to some residents.
For your tenants that are struggling it may be worth while to see if they qualify for any aid.
I've recently jumped in to help a friend(read tired landlord) who had never raised the rents for a tenant in a side by side that was in the unit for over 10 years. Throughout the years the unit has been updated-new paint, new kitchen cabinets, new carpet, new furnace and water heater. We've been raising her rent $100 every year, it will take us 6 years to get to todays market rents. I'm sure it was a bit of a pill for her to swallow, but I told her the intention was to get her up to market rents over time and I've given her 4 months notice for the increases(we're on year 2 now). She's a great tenant who hasn't asked for anything and taken excellent care of the place- its worth while to keep her.
You could also do some of the legwork for them, preparing a list of resources to help them out. Catholic Charities, and other sources of rental assistance; local human service providers; food pantries/meals on wheels, etc.; there are also ageing in place agencies that can provide information and resources that may be helpful to some residents.
I have actually considered that, but this is a sticky one, just like somebody who has a problem dog. We can give them suggestions, but it then puts us in a precarious position since they aren't asking for assistance. My husband is the best dog trainer around and could help anyone with their dog, but unless they ask for help, he has learned to keep his mouth shut. Same thing with housing assistance. They know that I will accept section 8 vouchers moving forward, but just the thought of somebody living in the same complex who is receiving assistance gets them fired up! Suggesting that they look into assistance would likely make them mad. If they want it, they will find it.......just like I did when I was a struggling single mom. Help is out there for people who need it and are willing to reach out to the programs.
For your tenants that are struggling it may be worth while to see if they qualify for any aid.
I've recently jumped in to help a friend(read tired landlord) who had never raised the rents for a tenant in a side by side that was in the unit for over 10 years. Throughout the years the unit has been updated-new paint, new kitchen cabinets, new carpet, new furnace and water heater. We've been raising her rent $100 every year, it will take us 6 years to get to todays market rents. I'm sure it was a bit of a pill for her to swallow, but I told her the intention was to get her up to market rents over time and I've given her 4 months notice for the increases(we're on year 2 now). She's a great tenant who hasn't asked for anything and taken excellent care of the place- its worth while to keep her.
If it was just 1 tenant and we didn't have so much cash stuck in this deal, I probably would go that route. Some of these tenants are great and they totally get it. Most of them are a 2 person household as well. I just was there today fixing a water heater pump when one of the awesome tenants was so appreciative. She said the last owner never wanted to fix stuff and simply ignored the "little" requests. If it's due to their negligence, that's one thing. Many of the issues she has mentioned was due to the landlord doing too many projects himself and doing shoddy work. She and her husband would totally be willing to move into the renovated apartment and pay the higher rate to get a nicer apartment! Those are the tenants I want to nurture......
We do a annual renewal and rent increase each year so they can expect it and decide whether to move or not The contract says we can do up to 10% increase that they sign the previous year to keep up with the market If they want to move to somewhere else who is at current market it is usually more expensive Keeping up with current market value is more important than worrying about vacancy if they can't pay the old rent how can they pay the next several years of increase coming Putting someone who is planning on paying more from beginning is easier than trying to squeeze it out of an old tenant
You could also do some of the legwork for them, preparing a list of resources to help them out. Catholic Charities, and other sources of rental assistance; local human service providers; food pantries/meals on wheels, etc.; there are also ageing in place agencies that can provide information and resources that may be helpful to some residents.
I have actually considered that, but this is a sticky one, just like somebody who has a problem dog. We can give them suggestions, but it then puts us in a precarious position since they aren't asking for assistance. My husband is the best dog trainer around and could help anyone with their dog, but unless they ask for help, he has learned to keep his mouth shut. Same thing with housing assistance. They know that I will accept section 8 vouchers moving forward, but just the thought of somebody living in the same complex who is receiving assistance gets them fired up! Suggesting that they look into assistance would likely make them mad. If they want it, they will find it.......just like I did when I was a struggling single mom. Help is out there for people who need it and are willing to reach out to the programs.
Absolutely get where you're coming from with this, but here's a flip side for you.
Great friend of mine has twice helped tenants find aid to help with rent(I'm not sure of the program but if you'd like I can find out). Both times tenants were so grateful for the help she was willing to give and they have each stayed for a few years now. The program approves them for a 18 months of rent and budgets for rent increases too.
Not sure if tenants told you or if it was just your observation that they may be paycheck to paycheck. People ware different and not all will search for aid they are not sure is there and might appreciate the guidance.
Of course these were tenants that were in good standing and take great care of their places.
For your tenants that are struggling it may be worth while to see if they qualify for any aid.
I've recently jumped in to help a friend(read tired landlord) who had never raised the rents for a tenant in a side by side that was in the unit for over 10 years. Throughout the years the unit has been updated-new paint, new kitchen cabinets, new carpet, new furnace and water heater. We've been raising her rent $100 every year, it will take us 6 years to get to todays market rents. I'm sure it was a bit of a pill for her to swallow, but I told her the intention was to get her up to market rents over time and I've given her 4 months notice for the increases(we're on year 2 now). She's a great tenant who hasn't asked for anything and taken excellent care of the place- its worth while to keep her.
If it was just 1 tenant and we didn't have so much cash stuck in this deal, I probably would go that route. Some of these tenants are great and they totally get it. Most of them are a 2 person household as well. I just was there today fixing a water heater pump when one of the awesome tenants was so appreciative. She said the last owner never wanted to fix stuff and simply ignored the "little" requests. If it's due to their negligence, that's one thing. Many of the issues she has mentioned was due to the landlord doing too many projects himself and doing shoddy work. She and her husband would totally be willing to move into the renovated apartment and pay the higher rate to get a nicer apartment! Those are the tenants I want to nurture......
So great that you are getting in to get things up to snuff- if they had an absent landlord before you might just be the best thing that ever happened to them! Really though situation to be in, wishing you all the best!