do you automatically up the rents each year?

Question

I have been reading a bit, and it sounds like some folks automatically raise their rents about 5% each year.  Is that pretty typical?  What do you all do?

Account Closed · Answer

Rents are dropping in my area. I just dropped one by $50 and the one before that by $150 to get them rented. The one coming vacant at the end of the month, I hope I only have to drop $50. I may have to drop it $100 to line up with new rents.

Every time you raise rents, your tenants are going to open up the classifieds to see what  else they could be living in for the new rental amount.  You want to make sure it isn't going to be worth the hassle of moving.

On the other hand, I know landlords who get rid of problem tenants by giving large rent increases which makes the tenants give notice and think that moving is the tenant's idea.

Not me. I don't play games. If I want them out, I give them notice to move. But raising rents is an option. At least if they stay and pay the new rent, you are getting more money for the trouble they are causing you.

Jason Henderson · Answer

If the market allows we try and raise our rents 5%-10%.  We will not raise the rents if it means loosing a good tenant.  Once you have to pay the leasing fees to find a new tenant you end up loosing any profit.

Michael Shadow · Answer

In a local market next to mine last year rents went up 7% and the year before,  10%.   This year it's looking to be around 7% again.  That is why one of my markets is doing so well but I don't expect it to keep up that pace in the next 5 years.

-Michael

Michael Dorgan · Answer

I keep my rents just under 'market' for the houses I have.  I make sure I have a quality product and therefore I have a large pool of renters ready to go.  I'd rather be under market rent a little and not have vacancies.  That said, I've been able to raise the rent on my nice house 8-10% for the last 3 years which has been nice indeed.

C. Burris · Answer

The problem with 5% is that it's going to increase exponentially.  Look at the cpi index history and the area.  Keeping the rental occupied is what counts.

Will Barnard · Answer

AND there is always more than one way to "skin the cat";. Just another wonderful advantage to investing in RE. So many options and many different ways to invest!

Mark N.A · Answer

Mouschi -

You now know why REI is both an 'art' and a 'science'.

Tom C · Answer

I don't have that option, wish I did. If you have any Section 8's, that is not an option either. You get what they are willing to pay you or you don't play with Section 8 renters.

Michael Rossi · Answer

Yeah, you can do that.  Unfortunately, in a lot of areas, that will mean that you won't have any tenants.

Mike

Michael Shadow · Answer

You must stay with the market.  I have some I can raise them 5% this year because of it's location and the era of the buildings, everyone is raising them that much, so I can to.  But in another area I can only raise them 2%.  You need to pay attention to your market.  It takes work to stay on top of things, you can't just plug 5% rent increases into a spreadsheet and expect that you are going to get that every year.

Our area has a very high demand for rentals right now so that is why the rents are rising faster than normal.  On the other side of that coin though there are a couple of high rise complexes going in so I suspect that next year or the following year they will be flat if not a bit negative.

-Michael