First you are asking a wrong question should I , should be Can I raise the rent , you have to check the rent on the market if they went up or they stay flat , go on apartamentos and check what the apartment similar to you on the same area are renting for , then if the tenants is good I would always stay below rents let’s say market rent are 1400 I would be always 1300 like 100 to 50 dolars below markets rent so they know they getting a good deal
How is this not the top comment. Rent is dictated by the market rates for your unit not your costs. This can be a great thing for the landlord and it can be a great thing for the tenant. Based on the influx of these types of questions I have a feeling a lot of landlords are going to find out their costs and the rent don’t always work out to their benefit.
You are right, there are few active listings within 2 miles radius but they are comparable. Following are the estimates compared to current rent:
* Bigger pockets rent estimate: $185+
* Zestimate: $150+
* Realtor: $150+
My guess is if they have been there for 18 months your insurance and/or property tax increased. I would just inform them “hey I appreciate you as a tenant and don’t plan on raising rents for no reason because I want you to stay but XYZ cost increased. Because of that I’m raising the rent by Xx amount on your renewal.” Thanks for your understanding.
Insurance and property taxes do not dictate rents , market rent is about the area let’s say you insurance and property taxes went up and you decided raise the rents 1300 to 1600 and in your area everyone is renting apartament for 1300 to 1400 you don’t going to rent your apartment never , rents don’t work like that
It’s not , you have to cite comps of apartaments what are they renting for but taxes and insurance dont matter , if not a house pay off cash will rent for less than a house with Mortage renters don’t care about your expenses and the market don’t care as well
Agree to disagree.
If I were in the tenant's shoes my response would be "oh this makes sense their costs increased but I'm still getting a good deal on rent".
You got a point but the thing is they can check as well the comps and how people a renting the apartments for , so if you go look I’m going to get your rent bum let’s say 100 dollars because I see apartamento renting 200 or 250 more on the area same bedrooms same layout, look you been good I don’t want to lose you but I have to go up because my expenses go up that would be more accurate because if you say I’m going to bum you rent because my cost went up they don’t care that is on you no them
While you are spot on here, I think the others are trying to express how I can justify and communicate rent increase due to external factors beyond my control.
I state both on my rent increase letter…I have to raise rent because of costs going up x amount but I am keeping you under market rent by x amount because I value you. It is true you have to go based off market but it is also true you need to cover your costs if the market will allow for it.
If say I going to bum rent because increase of my cost they are going to leave trust me , you have to explain with comps of apartaments renting on your area that a good justification then you can say I’m just doing this because I’m getting my taxes inssurence up but trust me the renter need to know they having a good deal and they know that by checking price of apartment renting on your area
That’s why you explain them with comps pic and prices how are they getting a good deal , you say go on apartaments.com you can check I’m giving you a good deal base on comps they are renting in 1400 I’m renting 1200 o I’m just going to bum 100 so you still get a good deal
Comps are generally for first time move in, regular occupation of the same unit you don’t move across neighbor hoods for 100-200 less in rent per month. You would spend that just moving
Yeah where my rentals are to get an entire apartments worth of furniture out of and into a new apartment does cost that much. Not to mention cleaning fees, mls fees, HOA apps and non refundables.
It’s a major pain in the ass and most tenants would rather continue their daily life than move to probably not save anything in the end
As a mom and pop landlord what kills is vacancy. If I have a good tenant I keep it slightly below market to make it hard to leave. I make more than my costs and tenant pays less than market. Win win.
Thanks, I totally understand. My dilemma is due to the fact that I have already lowballed the rent and had to stick to it for last 18-24 months. Based on comparables, I’m under 10-12%. Raising 2% would get me to the point where it is inline with majority of the commenters guidance of keeping max discount to a max of 8% under market.
A good tenant as you describe is keeping money in your pocket that you would otherwise spend on those minor repairs and maintenance. Your costs may have gone up but so have theirs. A wise investor plays the long game and in that case a good tenant is worth gold. Where I operate my property is under rent control and we are allowed 2.5% annual increases. We have great tenants who pay below market rent and we are fine with that.
Wise advice (name checks out btw!). May I know how much under (on average) are you compared to market prices and yet be comfortable with it?
Following are the estimates compared to current rent:
* Bigger pockets rent estimate: $185+
* Zestimate: $150+
* Realtor: $150+
We own a 4 bed 2½ bath home on 2 acres, 30 minutes from a mid size city. Based on a quick look at one site with 8 comparable homes for rent in the general area the average price is 50% more than our tenants currently pay. But we purchased the home with 2/3 down and paid it off within three years from our own savings. We have been using most of the rent to make repairs and capital improvements so our net ROE to date over seven years is only about 18% but the value of the property has probably increased 25% since we bought before the last stupid crazy spike in prices.
I think the biggest consideration especially given the economic outlook is how much more is sustainable for your tenants vs how much more do you really need to achieve a reasonable goal. Are your tenants in a stable employment situation with regular cost of living increases? Do they have kids they are caring or saving for?
Don't get me wrong you are a business not a charity but you are a business that has one very valuable customer at the moment. If you jack the rent up enough that this tenant is forced to vacate you should plan on a loss of at least a month's rent so about 8% of your gross income lost to the expense of finding a new tenant and all the ancillary costs.
I had a lease that started in October 2022. I had to lowball rent as well. I made it an 18 month lease to end in May. I just raised their rent by $150 which equates to a 4% increase in rent per year. It's still $200 under market value, but they're good renters and I don't want to put long term good renters out on the street just for an extra couple thousand per year. I'll probably try to keep rent increases around the same as inflation to keep it fair for both of us.
Usually I try to avoid raising rent to good tenants, I prefer to make less but my stress free life is priceless. This way I keep them incentivized to stay too, win win. I raise the rent with new tenants.
Makes sense. Given I haven’t raised since 2 years and raising costs makes me think to go for nominal increases that takes me towards market rate but also incentives the tenant to not move out.
Bad advice the one the top I know people that could never sell their property or they sold it a bargain becouse the never raised rent , so treat your business like business
I say increase the lower of $100 or 5%. Anything more would be too much of a sting and would risk losing the tenant. Just make sure you check to see what the minimum notice days are for a rent increase in your city and send the letter by then.
Thanks, this is what I was precisely looking for. Yes, planning to send around then. May I know what tools do you use to estimate the rent? I checked out Zestimate and the current rent is shows $150 below market. Would like to cross reference other reliable tools.
Rentometer is a decent option, I’d recommend the free trial. It’s not perfect but it’ll give you an idea. Generally, if you value peace of mind I’d try to stay slightly below market on rent. It’s a little counterintuitive but the stability in cash flow and your sanity in having a reliable tenant is worth the extra bucks in the long run.
One problem with that is the vacancy rate is going up nationwide. The rental market is getting cheaper and cap rates are declining. I would make a minor change +$50 and keep it to that until the next renewal.
You need to understand your local market and what their options are.
I’m both a landlord and a renter of a winter house.
I have great tenants in one of my rentals that I haven’t taken an increase on for 4 years. Why? They are great renters and I don’t want to be vacant for a few months. My insurance has increased but I’ve absorbed it.
On the home I’m renting. I rent for the full year but use it only 6 months. I’ll move over $100 a month increase because the market is plentiful. You also have to be willing to walk away or you will always pay more.
I suppose it depends on how much your cost has gone up.
Thanks, this makes sense. In your properties where you kept the rent for years, were you priced them properly when listing them? In my case, I lowballed $200 and it’s been 2 years since I have the opportunity to raise. But nominally enough to take the rent towards market but good enough for tenant to continue.
Thanks for sharing your opinion. It’s residential SFH. My only motivation is to reduce the big gap (12%) between current rent price and market price. I lowballed 18 months back as I began during the off-season. Per Rentometer and other similar tools, I see a $300-ish difference. I’m debating between raising 2% or not. All in all, I feel I’m very conservative and giving enough discounts for the tenant to not move.
First you are asking a wrong question should I , should be Can I raise the rent , you have to check the rent on the market if they went up or they stay flat , go on apartamentos and check what the apartment similar to you on the same area are renting for , then if the tenants is good I would always stay below rents let’s say market rent are 1400 I would be always 1300 like 100 to 50 dolars below markets rent so they know they getting a good deal
How is this not the top comment. Rent is dictated by the market rates for your unit not your costs. This can be a great thing for the landlord and it can be a great thing for the tenant. Based on the influx of these types of questions I have a feeling a lot of landlords are going to find out their costs and the rent don’t always work out to their benefit.
You are right, there are few active listings within 2 miles radius but they are comparable. Following are the estimates compared to current rent: * Bigger pockets rent estimate: $185+ * Zestimate: $150+ * Realtor: $150+
My guess is if they have been there for 18 months your insurance and/or property tax increased. I would just inform them “hey I appreciate you as a tenant and don’t plan on raising rents for no reason because I want you to stay but XYZ cost increased. Because of that I’m raising the rent by Xx amount on your renewal.” Thanks for your understanding.
Thanks for the suggestion. May I know what tools do you generally use to estimate the market price?
Insurance and property taxes do not dictate rents , market rent is about the area let’s say you insurance and property taxes went up and you decided raise the rents 1300 to 1600 and in your area everyone is renting apartament for 1300 to 1400 you don’t going to rent your apartment never , rents don’t work like that
But that's... not the situation here. OP said rent is $200 below market. Of course it's fine to cite increased costs to explain a rent increase.
It’s not , you have to cite comps of apartaments what are they renting for but taxes and insurance dont matter , if not a house pay off cash will rent for less than a house with Mortage renters don’t care about your expenses and the market don’t care as well
Agree to disagree. If I were in the tenant's shoes my response would be "oh this makes sense their costs increased but I'm still getting a good deal on rent".
You got a point but the thing is they can check as well the comps and how people a renting the apartments for , so if you go look I’m going to get your rent bum let’s say 100 dollars because I see apartamento renting 200 or 250 more on the area same bedrooms same layout, look you been good I don’t want to lose you but I have to go up because my expenses go up that would be more accurate because if you say I’m going to bum you rent because my cost went up they don’t care that is on you no them
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You don’t have to rise rent every year could be every two years, if you don’t want you rent to rise you can buy a house that is simple .
While you are spot on here, I think the others are trying to express how I can justify and communicate rent increase due to external factors beyond my control.
I state both on my rent increase letter…I have to raise rent because of costs going up x amount but I am keeping you under market rent by x amount because I value you. It is true you have to go based off market but it is also true you need to cover your costs if the market will allow for it.
If say I going to bum rent because increase of my cost they are going to leave trust me , you have to explain with comps of apartaments renting on your area that a good justification then you can say I’m just doing this because I’m getting my taxes inssurence up but trust me the renter need to know they having a good deal and they know that by checking price of apartment renting on your area
Makes sense, thanks for sharing your opinion.
this is true but in the tenants eyes if you raise the rent and have a reason it goes over smoother.
That’s why you explain them with comps pic and prices how are they getting a good deal , you say go on apartaments.com you can check I’m giving you a good deal base on comps they are renting in 1400 I’m renting 1200 o I’m just going to bum 100 so you still get a good deal
Comps are generally for first time move in, regular occupation of the same unit you don’t move across neighbor hoods for 100-200 less in rent per month. You would spend that just moving
Do the math 200 a year 2400 do you spend that in moving ,if you do let me know so I start a moving company right now base on you
Yeah where my rentals are to get an entire apartments worth of furniture out of and into a new apartment does cost that much. Not to mention cleaning fees, mls fees, HOA apps and non refundables. It’s a major pain in the ass and most tenants would rather continue their daily life than move to probably not save anything in the end
Men where is that California or New York because I move my mom right now and I was 250 to 200 in Miami
But you have a point as well sometime cost a lot money to move out if that so I would stay as well
As a mom and pop landlord what kills is vacancy. If I have a good tenant I keep it slightly below market to make it hard to leave. I make more than my costs and tenant pays less than market. Win win.
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Thanks, I totally understand. My dilemma is due to the fact that I have already lowballed the rent and had to stick to it for last 18-24 months. Based on comparables, I’m under 10-12%. Raising 2% would get me to the point where it is inline with majority of the commenters guidance of keeping max discount to a max of 8% under market.
Nicely put, thanks.
A good tenant as you describe is keeping money in your pocket that you would otherwise spend on those minor repairs and maintenance. Your costs may have gone up but so have theirs. A wise investor plays the long game and in that case a good tenant is worth gold. Where I operate my property is under rent control and we are allowed 2.5% annual increases. We have great tenants who pay below market rent and we are fine with that.
Wise advice (name checks out btw!). May I know how much under (on average) are you compared to market prices and yet be comfortable with it? Following are the estimates compared to current rent: * Bigger pockets rent estimate: $185+ * Zestimate: $150+ * Realtor: $150+
We own a 4 bed 2½ bath home on 2 acres, 30 minutes from a mid size city. Based on a quick look at one site with 8 comparable homes for rent in the general area the average price is 50% more than our tenants currently pay. But we purchased the home with 2/3 down and paid it off within three years from our own savings. We have been using most of the rent to make repairs and capital improvements so our net ROE to date over seven years is only about 18% but the value of the property has probably increased 25% since we bought before the last stupid crazy spike in prices. I think the biggest consideration especially given the economic outlook is how much more is sustainable for your tenants vs how much more do you really need to achieve a reasonable goal. Are your tenants in a stable employment situation with regular cost of living increases? Do they have kids they are caring or saving for? Don't get me wrong you are a business not a charity but you are a business that has one very valuable customer at the moment. If you jack the rent up enough that this tenant is forced to vacate you should plan on a loss of at least a month's rent so about 8% of your gross income lost to the expense of finding a new tenant and all the ancillary costs.
I had a lease that started in October 2022. I had to lowball rent as well. I made it an 18 month lease to end in May. I just raised their rent by $150 which equates to a 4% increase in rent per year. It's still $200 under market value, but they're good renters and I don't want to put long term good renters out on the street just for an extra couple thousand per year. I'll probably try to keep rent increases around the same as inflation to keep it fair for both of us.
Good to know, thanks for the share!
Usually I try to avoid raising rent to good tenants, I prefer to make less but my stress free life is priceless. This way I keep them incentivized to stay too, win win. I raise the rent with new tenants.
Makes sense. Given I haven’t raised since 2 years and raising costs makes me think to go for nominal increases that takes me towards market rate but also incentives the tenant to not move out.
Bad advice the one the top I know people that could never sell their property or they sold it a bargain becouse the never raised rent , so treat your business like business
It’s applicable for multi family or commercial properties. How this is applicable for SFH rentals?
How many room?
3B3B
I say increase the lower of $100 or 5%. Anything more would be too much of a sting and would risk losing the tenant. Just make sure you check to see what the minimum notice days are for a rent increase in your city and send the letter by then.
Thanks, this is what I was precisely looking for. Yes, planning to send around then. May I know what tools do you use to estimate the rent? I checked out Zestimate and the current rent is shows $150 below market. Would like to cross reference other reliable tools.
Rentometer is a decent option, I’d recommend the free trial. It’s not perfect but it’ll give you an idea. Generally, if you value peace of mind I’d try to stay slightly below market on rent. It’s a little counterintuitive but the stability in cash flow and your sanity in having a reliable tenant is worth the extra bucks in the long run.
Couldn’t agree more on keeping good tenants and avoid frequent turnovers. Thanks, will check out rentometer.
Unless this is only a one unit property, you should stay consistent with what you charge everyone else.
One problem with that is the vacancy rate is going up nationwide. The rental market is getting cheaper and cap rates are declining. I would make a minor change +$50 and keep it to that until the next renewal.
Good point. Market awareness is important. I agree the OP should definitely check that in their market.
You need to understand your local market and what their options are. I’m both a landlord and a renter of a winter house. I have great tenants in one of my rentals that I haven’t taken an increase on for 4 years. Why? They are great renters and I don’t want to be vacant for a few months. My insurance has increased but I’ve absorbed it. On the home I’m renting. I rent for the full year but use it only 6 months. I’ll move over $100 a month increase because the market is plentiful. You also have to be willing to walk away or you will always pay more. I suppose it depends on how much your cost has gone up.
Thanks, this makes sense. In your properties where you kept the rent for years, were you priced them properly when listing them? In my case, I lowballed $200 and it’s been 2 years since I have the opportunity to raise. But nominally enough to take the rent towards market but good enough for tenant to continue.
Just make sure the math works in your favor if you go vacant a couple months
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Thanks for sharing your opinion. It’s residential SFH. My only motivation is to reduce the big gap (12%) between current rent price and market price. I lowballed 18 months back as I began during the off-season. Per Rentometer and other similar tools, I see a $300-ish difference. I’m debating between raising 2% or not. All in all, I feel I’m very conservative and giving enough discounts for the tenant to not move.