How to increase Rent for a long term tenant

Question

I have a long term tenant, who is paying $500 for a 2 BR, 1 Bath apartment unit. Current market rent is $950 per Rentometer.

I don't have an lease agreement with the tenant which was expired long time back.

Please let me know how to proceed with a rent increase. (Also, Tenant is single and was paralyzed due to stroke). City is Athens, GA

Alex Craig · Answer

@Joe Kelly do not assume you know everything about all markets. This is what is happening in Memphis as I have seen it first hand and we are an extremely landlord friendly property.

Alex Craig · Answer

@Joe Kelly I do not disagree what it takes to be successful and hard decisions sometimes may have to be made, but when we make those decisions, we do it with empathy and to what we can before eviction days. Such things as recommend charities that may help, explore if they can get on section 8, give them job placement company #'s, etc. You may see 3 ghost on Christmas Eve.

Nathan Gesner · Answer

Moncy, why don't you hire a property manager? Are you afraid it's too expensive? A good property manager will ensure your rental is kept at current market rates which means they could handle all the work and you would still be making $300 more than you currently do! They will ensure you are always kept at current rates, that you have a strong lease that is enforced, regular inspections, and much more. Most of my clients came to me after managing on their own for years and most of them make much more money now with a lot fewer problems AFTER paying my fees.

Remember: cheaper doesn't mean you'll make more money.You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Moncy Samuel · Answer

@Alex Craig

Update:

Talked to the tenant explaining gently the reason for the rent increase.

I told him that “I would like him to stay” with new rent  and if it’s not acceptable, he can move out.

Drew Sygit · Answer

Couple points to add:

1) We always contact the tenant, explain to them the market rent and then ask THEM what they think a fair increase is. We've been pleasantly surprised in the past with tenants offering more than the amount we were thinking. If they say a low number of $0, then that also tells you they may not be able to afford it or how difficlut & stubborn they are going to be.

2) If you haven't been in the property in 4 years, it's time for you to do an inspection! Always balance RentReady repair costs against increase amounts - it's logical:)

3) COVID concerns: this may NOT be the time to have a take it or leave it approach. If the tenant responds by continuing to pay the old rent amount or stops paying anything, what are your options? It's VERY difficult to evict for nonpayment of rent currently. Many courts/judges won't even evict for end of lease!

If you decide to hire a PMC, be sure to ask them about all of the above!!! What happens if they use the take it or leave it approach and the tenant stops paying?

Theresa Harris · Answer

First talk to the tenant.  I would not increase the rent from $500 to $950 regardless of who the tenant was (at turnover, sure).  Gradually increase the rent.  Even if you get it to $700 (which is a huge increase for the tenant, but still below market value) that would be progress.  You can increase it again next year.

Jonathan R McLaughlin · Answer

@Moncy Samuel He just became paralyzed!!?? You have been hands off for FOUR years and NOW you are planning to go from $500 to $900 what the "F"???. Nice timing around Christmas too. Begin practicing what you are going to say to the local paper...

A better business and better personal approach would have been to be on top of this from the beginning and adjusting the rents each year. Don't hide your poor performance under the guise of "this is a business"

(update) I just saw this worked out for you. Good, but more proof you made the tenant bear the sudden burden of your lack of interest in being a good landlord. I hope you are able to accommodate a disability to appropriate ADA standards. You could actually have a good long term tenant with reliable payment if the place works out for them. Not that you deserve it.

Alex Craig · Answer

PM me and I will send you a copy of our lease extension letter.

Alex Craig · Answer

You could simply do a rental increase letter both signatures on it, the new amount and stating it is a extension of the original lease along with putting an end date, which is typically 12 months.

Moncy Samuel · Answer

Update:

Single family: I texted the tenant about the lease renewal and rent increase. She called me back and explained nicely the need for a rent increase. She accepted.

Multi; texted the tenant and no response.

Should i send a rent increase letter or a lease document because the lease expired long back.

How to increase Rent for a long term tenant

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