Raising the rent
How often do you raise the rent on your apartments? How much do you raise it when you raise? I have a three family b/stone. One apt the tenant isn’t renewing the lease so I can easily raise that rent. the other apt the lease isn’t up until Aug – this is the tenants’ first…
How often do you raise the rent on your apartments? How much do you raise it when you raise? I have a three family b/stone. One apt the tenant isn’t renewing the lease so I can easily raise that rent. the other apt the lease isn’t up until Aug – this is the tenants’ first year in the apt. I was thinking of raising the rent $50 (it’s at 1900 now) and feeling guilty about it, but then realized it’s not even a 3% raise. With the cost of heat in the past couple years, other maintenance expenses, etc…
I’m wondering what other people do – raise it only when tenants leave, when the mood strikes you, every year, etc. And how do you decide how much to raise the rent – based just on your expenses, how much the market will bear, or how much you like your tenants.
Thanks!
I think you should always raise the rent
when renewing, so tenants don’t get into
a habit of expecting no increase. Even if you
just raise it by a nominal $25, you shouldn’t
leave it flat.
I follow the Rent Guidelines as well, in general raising renewal leases 4% this year. I’ll usually do that the first year and see what’s cooking the second. 5-6 years ago, when expenses weren’t skyrocketing, I’d defer. Lately I’ve been opting to revisit the rent then too.
I used to not raise rent on current tenants, only when they move. Then I missed a BIG move in rents in the market and had to make SIGNIFICANT increases just to barely catch up to market. Lesson learned. Bump the rent every single year on every apartment. More than $50. At least $100. You will fall behind with $50 increases and at some point have to do what I did. It’s not pretty.
Is your tenant paying market rent. If 3 years go by the only relevant question is what is the market rent. The landlord’s additional costs have nothing to do with it. Is it worth increasing the rent for $50? I usually get market rent when I start and if it appears that the tenant is going to stick around, I wait and raise it. I have found that the typical hipster renter stays 2-3 years. I don’t raise their rent, they feel like they have a deal and don’t bother me.
There is no correct answer to this – it’s a balancing act between keeping good tenants, covering your costs and charging whatever neighborhood premium is appropriate. It’s all very personal.
We’re new to this too but plan on raising it commensurate with expenses… ie to cover inflation and utility increases. I’m all for playing fair but if you don’t raise it for these you wind up losing money each year.
Certainly a fair point. I’m taking the other tact though. After raising the rent for my new tenants versus prior pain in the neck tenants, I’m probably going with a very minor bump or no bump at all when their lease is up. New tenants keep the apartment spotless, have done a little painting themselves to spruce up the place further, and are no bother whatsoever.
Granted my costs have gone up this year, and ultimately I’ll pass part of that along, but I know what a drag bad tenants can be so I need to balance those two factors.
I asked a tenant for a 10% raise on his below market apartment (at the end of a two year lease) and he was stunned, absolutely shocked. I have owned the building for 2 years and in that time my taxes went up, my insurance went up, and energy went up. I put in all new windows, new hallway, stairs, carpet, marble flooring in hallway and vestibule, new light fixtures, internal mail box (lock key outside), gave them a new door and rectified multiple problems which were the result of the deferred maintenance approach of the previous owner. The tenant was stunned because he put up with the construction. Acknowledging this, I raised him 50 dollars on a one year lease, but told him that he will get a more significant raise next year. My other tenant I raised by 75 dollars and she didn’t object at all. What people don’t realize is that the old landlord cashed out at their expense basically. I have much higher carrying costs and the “gentrification” of the neighborhood and its attendant higher costs will inevitably have to rachet down into the rent structure. So sorry, but I am not providing subsidized housing, just a well maintained, attractive, warm, functioning building.
My landlord increased my rent 4% this year. I believe the rate was in line with the rate increase recommended by the NYC Rent Guidelines Board (for a one-year lease; rate increases are also different according to the rent you currently charge for the apartment). You can see these rates on http://www.housingnyc.com. They are different for one or two year leases, so you can feel like you’re giving your tenant a choice.