Raising Rent or Holding onto Good Tenants?

Question

Hey there! We've got two leases expiring this summer in the Austin, TX area, both with good tenants.

We are a few months out but already considering how to address the next lease cycle. Are you a landlord? Given the economy, how are you going to proceed with your leases this Spring/Summer?

Nathan Gesner · Answer

This is not an "either, or" scenario. You can raise the rent and keep good tenants. If your property is worth $2,000 a month then a good tenant will pay $2,000 a month.

Determine market rate and raise to that amount. If your tenants are excellent in every way, then you may consider keeping the rent around 5% below market as a reward or enticement, but I don't recommend much lower than that.

Drew Sygit · Answer

@Lacey A. DO NOT ASSUME!

We’ve found the best way to raise rent is:

• Determine market rent
• Share the proof with the tenant
• Tell the tenant, given your rent is $x and market rent is $y, what do you think if a fair increase?
• Often, they may volunteer a higher amount than you were hoping for.
• Those that respond “$0” or something ridiculous, you can request income documentation from them to justify.
• Don’t be afraid to share with them how much your property taxes & Insurance increased and that YOU cannot afford to absorb the.

ALWAYS get an increase or something of value annually or tenants will start thinking they should never have an increase, making future increases that much more difficult to negotiate.

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Travis Biziorek · Answer

There are a lot of variables here. Are you currently under market rents? What have rents done in your area lately? It seems they are softening a bit in most markets.

I have 14-doors in Detroit and my wife and I have been discussing this same thing. For the last few years we've been raising 5-10% each year trying to keep up with the market. But this year we'll probably either not raise at all (if they are close to market rent) or raise more like 3% if they are well below market.I have a duplex with two tenants that are FANTASTIC, both paying $875/mo when I could likely be getting $1,000-$1,000 each. I'll probably raise both of them $25/mo when I raised them $50/mo last year. I would hate to lose these tenants and I'd lose more money turning the units if they were to leave.

I have a SFH that has gone from $750/mo (we cut him a deal) three years ago and is now at $1,000. Market is probably closer to $1,200 and we plan on bumping them $50. They are great tenants and I know they love the place and likely won't move.So it's really a case-by-case basis for us, weighing how in line they are with current market rates and how much it would cost you to turn the unit if they were to leave instead of re-upping. Hope that helps.

Jordan Moorhead · Answer

We also just told our PM to raise rents on 8 properties in Louisville

Jordan Moorhead · Answer

@Lacey A. I just raised rent on my two here in Austin and they signed with no complaints. Our other two are MTR and we're almost fully booked for the year at $2550 for a 2 bed and $3300 for the 3 bed

Eliott Elias · Answer

I've had to keep rents right under market value to keep mine occupied. There are too many rentals on the market right now.

Kevin Paulk · Answer

@Lacey A.There are many landlords out there who refuse to raise the rent only to find themselves hundreds of dollars below market value and missing out on a lot of money. Don't turn into that landlord.  Even if you raise it a little bit, raise the rent. You owe it to your rental business not too.

Jeremy Horton · Answer

How much would you be raising it by?

@Nathan Gesner has it on point. Why not do both?

Raising Rent or Holding onto Good Tenants?

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