Polling all Landlords on Rent Increases
I have very good tenants in one of my apartments, paying about $500-700 below market-value. The apartment has garden access, basement storage and a washer/dryer in the cellar. I wish I didn’t have to raise the rent, as these people have become friends, but I’m being hit by water and gas increases that are making…
I have very good tenants in one of my apartments, paying about $500-700 below market-value. The apartment has garden access, basement storage and a washer/dryer in the cellar.
I wish I didn’t have to raise the rent, as these people have become friends, but I’m being hit by water and gas increases that are making my head spin!
Is anyone aware of a percentage increase that can be applied to the utility increases we’ve experienced (it’s a 4 family house)?
And, regardless of the percentage question, I’d love to get input on what people are doing for rent increases.
From what I can see, this is a very desirable neighborhood, with little inventory available.
Thanks!
I’ll concur: by my landlord’s standards (and http://www.rentometer.com/) I’m paying well under what he could be getting (which is kind of different than “median rent”) for the apartment. I think he imagines he could get another $600.
But would they stay? Would they pay their rent? Would they fix things themselves (I’m actually good at this stuff, but maybe an amateur plumber is not an asset) or call you once a week?
Banks let you count on rent for 75% of the income it provides, when you’re calculating how much mortgage you can afford. A long term tenant paying rent regularly is nothing to shake a stick at.
Don’t raise their rent by more than 2-4% at a time. If you really never raise the rent, 4% is fair. Otherwise, stick to 2%.
Decide what is most important to you. If getting market rent is, then raise it to market, fast or slow – if fast, give them months to find a new place.
If you like having good tenants (which would be true even if they weren’t friends), raise it no more than $75-100 per year. That will cover your additional expenses and not invite headaches. And you can raise it to market when they move on.
I like the poster above who said they are never at market except at the moment they rent. This is true.
And, as a good tenant, I appreciated my landlords who only raised it in smaller amounts. I was aware of the increase in rents around me, and always knew they could raise it more if they wanted to. Which was one of the factors that led me to look to buy a place. When I did, my landlords were shocked and happy to find out they could get 50% more from the next folks (that was the rise in market rates in only 4 years.)
In other words, what Rick is saying is that he gradually raised this guy’s rent and the guy eventually moved out.
You’ve got to think about whether or not it’s worth risk of losing these great tenants. Sure, you’ve got to cover your expenses (and good tenants should realize that and understand a gradual, small increase), but you also need to live in that house.
$500 to $700 is a BIG monthly increase, and will likely mean that these people will move on (I would), no matter how slowly it’s phased in. You’ve got to decide if the additional income is worth it. It might be, but you might also be risking big headaches.
Separate the utilities. Separate meters for every apartment should pay for themselves over time and save you this kind of uncomfortable headache.
When you offer a new lease list the utilities on the document in the amount you are looking for.
Try to discuss with tenant first.
I’ve had good and bad tenants. The good ones are worth more to me than getting market rate — and $500-700 can be 10% below market rate or 50%. I think market rate might be around 2100 for the floors I rent, and I charge 1500-1650 and make out fine. I figure I’m always behind the “market” except on the first day I rent it. I’m fine with that.
Last month I raised one lease up $75 a month. It covers rising expenses and I feel lucky to have these people for another 2 years and not a single headache.
I think you know the answer to your question. You’re falling too far behind market value. As a homeowner myself I know the pain of the utilities going up too. You have to talk to your tenants and see how they feel about their rent going up. I’m sure they will not be happy about it, however they may be okay with paying market value over time. If they are your friends, perhaps you could offer to bring the rent up to market value over 2 years? I was in this spot a few years ago and made this offer to my tenant. He was very understanding and It got him to shop around and in a few months he did move out because he found a better deal for himself. I was able to rent the apartment at market value, so it worked out for both of us.